With industrial (IIP) growth in the April – January 12 period at 4 percent, industry needs strong easing signals from the RBI in order to ensure that investments pick up. Capital creation in the economy has been growing at a negative pace and this does not bode well for the growth outlook of the economy for the medium term. While it is possible that Q4 numbers might be better than Q3, we have to look at the medium to longer term perspective and for that it is imperative that the investment demand in the economy picks up to ensure that the economic fundamentals remain strong enough such that minor ups and downs can be weathered by a robust economy. Therefore, CII would have liked the RBI to have used this opportunity to reduce headline rates with an unequivocal statement. This would have helped the investment cycle to pick up, since monetary policy transmission in the system in India operates with a lag.
15th March 2012