PHD Chamber suggests RBI to reduce repo rate

New Delhi, Jul 15 : One of the known industry body PHD Chamber of Commerce and industry today suggested Reserve Bank of India (RBI) to reduce the repo rate which will effect into reduction in interest rates for various segments. In a statement issued here today, chamber president Gopal Jiwarajka said, “We appreciate the efforts of the Government to tackle the inflationary scenario which has come down significantly from 6.1 per cent in July 2016 to the level of 1.5 per cent in June 2017. WPI inflation has also decelerated from 3.3 per cent in January 2017 to 0.9 per cent in June 2017.” “However, despite the significant deceleration in inflation rate, the repo rate is still high and growth of industry and manufacturing sector is in the lackluster trajectory,” said Mr Jiwarajka. He added that the growth in industry output, as measured in terms of IIP, for the month of May 2017 grew only at 1.7 per cent of which the growth of manufacturing sector stands at 1.2 per cent in the same period. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) fell to a four month low of 50.9 in June 2017 from 51.6 in May 2017, signaling a subdued improvement in the manufacturing sector. So, at this juncture rate cut becomes inevitable to support the industrial growth and to enhance the competitiveness of the manufacturing sector, said Mr Jiwarajka. Now, almost all the factors are favourable such as good monsoon behavior, inflation is under control and GST is implemented, he said. He added that considering the good monsoon behavior supported by reforms in the supply side, we believe the inflation should not be more than 4 per cent in the current financial year 2017-18. “It is inspiring to know that India’s inflation rate is lower as compared to various advanced and emerging economies such as United States of America (USA), Germany, South Africa, Brazil and Russia,” he said. However, interest rates in India are much higher than USA, Germany, China and Singapore, he said. It has been observed that USA have lower inflation rate (1.6 per cent), but at the policy front, interest rates in the country is also low at 1.25 per cent. Similarly in the case of China and Singapore, the inflation and interest rates are in the lower trajectory. RBI reduced repo rate by 25 basis points in October 2016, however, industry was expecting a rate cut at so many junctures. Firstly, at the time of demonetization, secondly at the time of fiscal consolidation measures announced during Union Budget 2017-18 and thirdly at the time of good monsoon in July 2017, said Mr Jiwarajka. UNI