Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the government to take steps to bring down the rate of interest in the country. A delegation of industry representatives in this regard met Prime Minister Manmohan Singh on Tuesday and suggested that lower interest rates were necessary for a quick revival of the economy.
FICCI contends that although public sector banks have reduced interest rates, their private counterparts were still to follow suit. The Federation believes that keeping the rates low was necessary in the current circumstances to push induced investment in the economy.
Another issue that was bothering the industry, according to FICCI, was that the huge government borrowing programme in the current fiscal and the drought-like conditions could lead to higher inflation forcing the Reserve Bank of India (RBI) to start winding up its easy money policy, leading to spike in interest rates.
FICCI therefore wants the government to ensure that interest rates do not rise contending that the recovery process would be adversely impacted otherwise. India’s monetary authority RBI has cut its benchmark short term lending rate by 425 basis points since September last year to a record low of 4.75%.
However, with inflationary pressures building up in the economy, particularly in the agri-commodity segment, RBI is expected to begin reversing its monetary policy stance by end of the fiscal. However, the industry body wants the government to imitate China in terms of following a loose money policy and allow the local economy to boost at a time when global economy continues to crawl.