India Inc asks RBI to cut interest rate

Expressing disappointment over slow growth of the industrial production, India Inc today asked the Reserve Bank to cut interest rate at which the central bank lends to banks to help boost investments.

"The IIP figures are disappointing. What is of serious concern is the sharp drop in electricity production even as the manufacturing sector continues to stagnate due to faltering investments," CII director general Chandrajit Banerjee said in a statement.

He said that while the recently announced reform measures have revived business confidence to some extent, "what is required now is a commensurate action from the RBI with a cut in repo rate. This has become a necessity now to kick start the investment cycle".

Industrial growth slowed to 2.7 per cent in August due to poor show by the manufacturing sector and contraction in capital goods output.

The overall factory output, as measured by the Index of Industrial Production (IIP), grew at a slower pace than 3.4 per cent recorded in August 2011.

On sequential basis, however, IIP had contracted by (-) 0.18 per cent in July and (-) 1.8 per cent in June.

Ficci president R V Kanoria said that the recent government's initiatives like allowing FDI in multi-brand retail and civil aviation have resulted in improved policy framework for the business.

"It is possible to achieve higher industrial growth by keeping up this momentum of reforms," Kanoria said.

He said the government should now resolve implementation issues such as land acquisition and environmental clearances related to various infrastructure projects on urgent basis.

"The proposed National Investment Board under the chairmanship of the prime minister to resolve such ground level issues related to large projects could certainly help in speedy clearance of projects and stimulating industrial growth," he added.