The Hindu Business Line : India Inc expresses disappointment

INDIA Inc has expressed mild disappointment, though not in so many words, at the absence of any further bank rate, cash reserve ratio or repo rate cuts in the RBI Governor, Dr Y.V. Reddy's maiden mid-term monetary and credit policy review statement.

"We see this credit policy as one that emphasises continuity," said Mr Anand Mahindra, President of the Confederation of Indian Industry (CII).

The response of the President-Elect of the Federation of Indian Chambers of Commerce and Industry (FICCI), Mr Y.K. Modi, was more direct: Against the background of favourable growth rate and low inflation rate, "a further reduction in the bank rate would have added fuel to the economy's growth engine".

Taking a somewhat more diplomatic position, Mr Mahindra said given the already soft interest rate regime and the recent 50 basis point cut in the repo rate, "CII understands why the RBI has kept the bank rate unchanged at 6 per cent" and shown no urgency to immediately reduce the CRR". At the same time, he hoped that the RBI would bring down both these rates, "preferably around mid-February 2004, prior to the Union Budget".

The CII President further noted that in today's environment, it was "anachronistic" to expect all changes in monetary, credit, interest and exchange rate policies to be announced either in November or April. "The RBI can always introduce appropriate changes at any point of time, instead of waiting for the beginning of the so-called busy season and the slack season," he added.

The President of the PHD Chambers of Commerce and Industry (PHDCCI), Mr P.K. Jain, was, however, the most blunt of them all. "The focus of the policy appears to be to check benign inflation and not to stimulate growth" and it has "not come up to industry expectations," he said.

Mr Jain also lamented the lack of any concrete steps in the policy to bring down interest rates to second-rung borrowers.

"Excepting triple-rated corporates, others have to borrow funds at around 14 per cent. RBI should have evolved a mechanism to enable banks to fix their prime lending rate not exceeding a prescribed ceiling of, say 8 per cent for all class of borrowers," he added.

Echoing a similar sentiment, the FICCI President-Elect said while interest rates had fallen drastically for government borrowings, Indian industry, particularly the small and medium enterprises (SME), continued to pay high rates of interest. He pointed out that the interest rate differential between the top-rated borrowers and SMEs was currently in the range of 8-10 percentage points. The President of Assocham, Mr R.K. Somany, welcomed the overall thrust of the mid-term review, which "indicates a continuity of measures yet gives strong signals for change".

He, however, felt that the RBI Governor should have announced definite policy measures to reduce the risk aversion of bankers while disbursing loans to agriculture and small-scale units.

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