'India a victim of loss of confidence'

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SME Times News Bureau | 11 Jun, 2012
Industry body ASSOCHAM has recommended a six-pronged strategy to the RBI for controlling inflation, dampen risk to growth and re-instill investors’ confidence as the economy has become a "victim of loss of confidence and, indeed, not of opportunities".

"Therefore in such testing times responsibility of the apex bank RBI becomes all the more important to address growing concerns on the falling investment and liquidity faced by the system as the government borrowings shoot up," said Associated Chambers of Commerce and Industry of India (ASSOCHAM) president Rajkumar Dhoot on Sunday.

The chamber has underlined an urgent need for lowering repo rate up by 100 bps and CRR by 100 bps to reduce cost of borrowings and boost investments. In addition, it mphasized the need for deregulating FCNR as well as NRE deposit interest rates to support the rupee in view of falling foreign exchange inflows-export credit to be reduced through interest subvention.

Eased capital adequacy norms for Real Estate as well as power sectors bank credit to increase funding needs to help them to drive the other segments of the economy. Therefore, it viewed, India should float sovereign deposit bonds in Foreign currency to attract FE inflows to strengthen rupee.

Also the FIIs holding limits in Corporate as well as government bonds be hiked substantially as an attempt to improved inflows. Opening up a separate window to sell foreign exchange to bulk buyers / oil companies to check unwanted volatility in the FE market impacting rupee dollar rates will also help the economy.

Having all the resources at RBI command, small steps in restoring the confidence and reversing the negativity that has pervaded, would definitely improve and enhance the momentum the country seems to have slowed down. This will also give further impetus to the infrastructure sector in the context of the PM’s decision, Dhoot said.

However, the ASSOCHAM chief said current growth rate of 6.5% in the last fiscal is by no means small when viewed in the backdrop of the Global slowdown and sovereign crisis sweeping Euro Zone.

ASSOCHAM called upon the government and its leadership to desist from making such policy prescriptions that at the present juncture may not be congenial and supportive in view of the testing times the country is passing through.