NEW DELHI: India Inc’s appeal for easing of Reserve Bank’s key interest rates grew stronger as inflation declined to 9-month low of 4.68 per cent in February.
“The moderation in inflation should induce the RBI to make a shift towards a more accommodative monetary policy stance to revive investment and propel demand especially as investment demand is declining and consumer durables are in the red,” CII Director General Chandrajit Banerjeesaid.
For the first time in nine months, inflation based on Wholesale Price Index, slipped below the psychological mark of 5 per cent in February on easing prices of onion and potato.
Industry officials believe that this has created headroom for RBI to cut interest rates in the monetary policy review on April 1 so as to boost the sagging economic growth.
RBI has maintained a hawkish interest rate regime to tame inflation. Industry, on the other hand, has been demanding a cut in interest rates to boost economic growth, which has slowed to a decade-low level.
“The decline in inflation will hopefully create some space for monetary policy easing by the RBI. This is imperative as the sentiment of caution continues to weigh heavy on the minds of investors,” Ficci PresidentSidharth Birla said.
Food inflation dropped to 8.12 per cent in February, compared to 8.8 per cent in January, as the rate of price rise slowed in almost all items, except fruits and milk.
“A cut in repo rate at this juncture would pave the way for economic recovery to become more visible and sustainable,” President of PHD Chamber of Commerce Sharad Jaipuria said.
Inflation, which is on decline since December, was 5.05 per cent in January. Prior to February, the lowest WPI was recorded in May 2013 at 4.58 per cent. In June, it had inched up again to 5.16 per cent.