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Slash interest rates to resume growth: PHDCCI

Appreciating efforts of RBI to contain rupee volatility, President, PHD Chamber of Commerce and Industry (PHDCCI), Suman Jyoti Khaitan has advised policy makers stating that such measures should not end up undermining investments and consumption scenarios in the economy.

RBI increased the Marginal Standing Facility rate and Bank rate to 10.25 percent and has set the overall limit for access to LAF (Liquidity Adjustment Facility) for each bank at 0.5 percent of its own NDTL (Net Demand and Time Liabilities) and mandated the banks to maintain a minimum daily CRR balance of 99 percent of its requirements.

The softening of monetary policy stance is one such step which is the need of the hour as it will lead to a phase of consolidation and stability in the sagging economy and pave way to plus 8 percent growth in the coming years.

Commenting on RBI's recent policy measures to prevent rupee from depreciating further against the dollar, the chamber has pointed out that India is a domestic consumption driven economy in which vast components of demand side indicators, contributing to GDP have shown a decelerating trend.

The growth rate of private final consumption expenditure has been decelerated to 4.1 percent in 2012-13 from 9.4 percent in 2007-08. Whereas, the growth rate of gross fixed capital formation declined to 2.5 percent in 2012-13 from 16.2 percent in 2007-08.

The slowing down of India's GDP growth, year after year is a matter of concern. The industry sector has been exhibiting a disappointing performance mainly driven by the slack in manufacturing and mining activities. The major impediment to this sector has been the spiral in its input costs including high borrowing costs, shooting energy costs and flaring up of manpower costs.

At this juncture, government should focus on immediate policy actions to remove bottlenecks to growth. The economic policy of the country should prioritise on stabilizing the macro-economic environment to retain the confidence of investors with promises to open more avenues for projects, policies, products and partnerships.

PHDCCI holds that critical issues relating to industry such as land acquisition and environmental clearances needs to be addressed immediately to retain confidence in investors.

The government should nudge entrepreneurs to invest more by unveiling investor friendly policies. These policies should include incentives for infrastructure and employment intensive sectors of the economy said Khaitan.