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Tuesday, Nov 04, 2003

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`Stance on rate cut reflects prudence'

Our Bureau

Mumbai , Nov. 3

THE Indian Merchants' Chamber has extended a cautious welcome to the to the RBI's Monetary and Credit policy announced today.

In a statement, Mr Shailesh Haribhakti, President, IMC, said while market expectations about interest rate reduction were not met, the Reserve Bank of India's projections of a higher GDP growth rate between 6.5 per cent and 7 per cent, lower average inflation rate of 4 per cent and 4.5 per cent for the current year and pick-up in the investment climate in the past few months were heartening.

He added: "I wholeheartedly agree with the policy of not making changes only at the time of mid-term review and hope that interest rate will be brought into globally competitive dimension."

Mr Vijay G. Kalantri, President, All India Association of Industries, said the setting up of a working/advisory group to monitor adequate and timely cash flow to agriculture and small-scale sector, a measure necessary to further simplify and rationalise the credit flow procedure.

He added that the policy had not reduced interest rates, thus protecting pensioners and promoting savings.

Ms Naina Lal Kidwai, Vice Chairman and Managing Director, HSBC Securities and Capital Markets (India) Private Ltd, said: "The central bank's stand on interest rates reflects prudence on the part of policymakers in light of the strong growth scenario. The RBI has revised the growth forecast upwards and also expects a pick up in investment cycle. Even as the markets are disappointed by absence of any rate cuts, the news of investment recovery should be comforting to equity markets at current valuations and we expect the positive sentiment in equity markets to continue."

Bajaj Capital CEO and Director, Mr Anil Chopra, however, found the Credit policy disappointing for the debt markets "where there was an expectation of a bank rate cut of 25 bps, CRR cut and introduction of a variable repo rate".

He added: "The RBI has, however, stated that soft interest bias would continue and hence we may see a rate cut possibly later. Higher GDP forecast and downward bias on inflation are positive for the equity and debt markets."

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