SME Times News Bureau | 06 Apr, 2015
Ahead of the RBI's bi-monthly monetary policy review on
Tuesday, the FICCI said on Sunday that any cut in interest rates would not be
"adequate to stimulate investment in manufacturing" given the lack of
"significant change in demand conditions".
The Federation of Indian Chambers of Commerce and Industry (FICCI) in its
latest quarterly survey said 69 percent of respondents do not foresee any
substantial increase in investments by their organisation as a result of
reduction by the Reserve Bank of India (RBI) in repo rates at which it lends to
commercial banks.
"Interest rates or cost of finance continues to be sticky. At least 58
percent of respondents reported availing credit at over 12 percent average
interest rates," FICCI said in a release.
"For Q-4 (January-March 2015), 73 percent respondents reported that they
don't have any plans for capacity additions for the next six months.
Availability of land, delay in regulatory clearances, poor demand conditions,
and high cost of borrowing are some of the major constraints affecting the
expansion plans of the respondents," it added.
In terms of order books, it said the survey result "remains same as of the
previous quarter (Q-3), indicating no significant change in the demand
conditions".
The FICCI survey gauges the expectations of manufacturers in 13 sectors -
textiles, capital goods, metals, chemicals, cement and ceramics, electronics,
auto components, leather and footwear, machine tools, food and fast moving
consumer goods, tyre, paper and textiles machinery.
"Responses have been drawn from 272 manufacturing units from both large
and SME segments with a combined annual turnover of over Rs.400,000
crore," the FICCI said.
The RBI is widely expected to leave the repo rate unchanged at 7.50 percent at
its first monetary policy review of the new fiscal on Tuesday, after two
unscheduled rate cuts made this year.
"Not expecting any rate cuts this time, not for another one or two
months," Vinod Nair, head of fundamental research at Geojit BNP Paribas
Financial Services, told IANS from Mumbai.
"It is very difficult this time with retail inflation increasing. The RBI
would also like to look at the public sector banks' distressed loans
restructuring issues during the last quarter," he added.
Nair said the RBI wanted to see the impact of a possible hike in US interest
rates by the Federal Reserve in June, though that appears less likely.