SME TImes News Bureau | 16 Aug, 2012
With inflation easing to a nearly three-year low in July, the Indian industry expects that RBI will cut interest rates to prevent faltering growth.
Industry body CII hopes that the declining trajectory of inflation would encourage the RBI to revisit its monetary policy stance and cut its policy rates to rejuvenate growth in the industry which has been hit by high interest costs and flagging investments.
"As is evident, core inflation continues to be stable and inflation related to food prices is supply driven and not due to excess demand," said CII, adding that steep rise in food prices was a concern and weak monsoons could lead to a further spike in food prices.
Expectations of an interest rate cut have gathered pace in recent weeks after a disappointing industrial output data which showed a sharp decline - the third in four months.
Finance minister P Chidambaram's comments that interest rates are high and the government will take steps to ease the burden have also added to expectations.
However, some economists doubt that the drop will not be enough to persuade the RBI to cut interest rates at its September meeting to try to revive the struggling economy.
