RBI Governor and the MPC combine see demand contraction as an overwhelming reason signaling a pro-growth stance: FIEO

New Delhi, October 4, 2016: Shri SC Ralhan, President, FIEO while welcoming RBI’ s decision to reduce repo rate by 25 basis points stated that RBI and MPC combined decision to give a pro-growth signal would rev up investments which in 2016-2017 showed a growth of 8.1% over 6% in the previous financial year and credit off-take showing some traction for the non-food sector increasing to 4.9% in the fiscal 2016-17 vis-a-vis from the previous 2.3%.

FIEO chief stated it is now that the ball is in the banks court to reduce rates such as the earlier backlog of 1.5% reduction since December 2014 and the present reduction would be passed on to the end user. This along with the implementation of the marginal cost of lending would reduce rates by at least by two percentage points for at least a third of those seeking loans in the current financial year.

The new Governor and his team with the MPC has taken a calibrated approach towards giving inflation a go- by for the present to address a more overwhelming reason which is demand contraction which is much appreciated by trade and industry.

It is anticipated that retail inflation, which rose from April till July (from 5.39% to 6.07%) before dropping to 5.05% in August, may drop to 4.5% in September-­October and even lower settling around less than 5% by end of this fiscal.