The Commerce and Industry Minister, Mr Anand Sharma, on Monday termed the banking regulator, RBI’s decision not to cut key policy rates, as “disappointing.”
Mr Sharma said “there is definitely a case for relook at reducing interest rates,” citing the low investment sentiment, decline in manufacturing growth and the fact that the manufacturing sector was not a contributor to the higher rate of inflation.
The Minister added that he would soon write to the Finance Minister and the RBI Governor in this regard. Mr Sharma said there was a general expectation of an interest rate cut by the RBI, especially since “there has been a decline in manufacturing for the last eight months.”
Manufacturing decline
“Industrial production has been adversely impacted. The investment sentiment is low. Therefore the RBI decision, whatever reasons they have based it on, is disappointing and will not help in reversing the trend when it comes to manufacturing,” he told reporters.
“To the best of my understanding, the RBI’s logic of not doing this is due to inflation. (But) Inflation is not in the core sector manufacturing,” he said, adding that manufacturing inflation declined from over 7 per cent to little over 5 per cent in the last eight months.
He said inflation was due to rise in prices of food articles, particularly in seasonal vegetables, and not in vegetables available throughout the year.
India Inc has been demanding an interest rate cut for reviving economic growth. However, the RBI, in its monetary policy review on Monday, did not change the key policy rates due to the increasing inflation and the global economic uncertainty.
The manufacturing sector has been an area of concern for the Government in the recent months due to its sluggish growth. One of the reasons for lower investments in manufacturing has been the high cost of credit, according to the industry. The Government had recently announced a new National Manufacturing Policy with a slew of incentives for the sector.
Meanwhile, Mr Sharma also denied reports of announcing sops in the Foreign Trade Policy annual supplement without the Finance Ministry’s approval.
“The Government of India does not function that way. There is a complete understanding between me and the Finance Minister. I would not have announced something which the Finance Minister has not concurred to. So I reject that (report) completely,” he said.