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RBI Needs To Target WPI Inflation of 3-4 per cent: Assocham

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At a time when central banks in most parts of the world are going to new lengths to ease money and push growth, the ASSOCHAM expects the Reserve Bank of India (RBI) to at least take note of the fact for well over a year, the Wholesale Price Index (WPI) for several industrial products has remained in a deflationary mode, requiring an urgent infusion of life -saving consumer demand.

RBI Needs To Target WPI Inflation of 3-4 per cent: Assocham
 

"A whole lot of manufactured products including cotton textiles, manmade products, chemicals and organics, rubber -plastics, iron and semis, have suffered deflation," ASSOCHAM President Mr Sunil Kanoria said, seeking cut in interest rates in the policy Repo by the RBI.

He said while the RBI is certainly not expected to go anywhere near the western central bankers, who are going to the other extreme positions of zero or negative interest rates, Dr Raghuram Rajan can be a little more accommodative with the monetary policy to boost the economic growth, particularly in the industrial production.

The Index of Industrial Production (IIP) declined by annualised 3.2 per cent in November, 2015. The cumulative growth for the period April-November 2015 over the corresponding period of the previous year stood at mere 3.9 per cent. Mining, manufacturing and electricity sectors continue to remain in distress.

"In fact, when it comes to WPI, it is time the RBI started setting target for at least 3-4 per cent inflation over the next two quarters. We cannot afford deflation for long. Looking at only Consumer Price Index alone will not be a wise policy," the ASSOCHAM said.

Besides creating the demand at the consumer level, the moderating of interest rates would bring in much-needed interest burden of the over-leveraged industries in sectors like real estate, telecom and infrastructure.

Mr Kanoria also impressed upon the RBI to further exert pressure on the banks to adequately pass on the previous cuts in the interest rates.

 

"Even though the policy rates have been cut by up to 125 basis points in the last one year, there are still industries particularly at the SME level which are still given loans by banks at 13-14 per cent. This must stop and accountability be fixed".

Read more about: assocham rbi wpi
Story first published: Monday, February 1, 2016, 14:42 [IST]
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