MUMBAI/KOLKATA: India Inc approved of
the RBI's move of raising repo and reverse repo rates to tame the double-digit
inflation but it feels that this could discourage them from making big ticket
investments and expansion plans. "It will dampen the expansion plans of
corporate India, as we enter the crucial investment/capex cycle required to
sustain the growth," said D Muthukumaran, head - group corporate finance, Aditya
Birla group.
India Inc. feels that an attempt should have been made
to preserve the positive sentiments of India, which is one of the few high
growth countries in the world today. Amit Mitra, secretary general, Ficci said,
any instability at this stage could derail the economy from the growth path.
"With the European economy risk looming large and continuing uncertainty in the
US economy, the global capital inflows may continue to remain volatile," said
Mitra.
"Thanks to sthe uccessful telecom spectrum auction, there is a
possibility of deferment/reduction in the government borrowing programme and
this could have had a bearing on the timing of the announcement," said R Shankar
Raman, senior VP (finance & legal), Larsen & Toubro.
Shankar
Raman, however, feels that the quantum of increase is not expected to affect the
borrowing programmes of the corporates.
"The current tightness in the
money market is also expected to ease in a month's time or so," said VG
Raghavan, director - finance, Essar Group. Swati Piramal, president, Assocham
appeared content with the move. She said that the RBI has handled the
inflationary up swing and maintain liquidity in a very balanced manner showing
concern on inflation but not hurting the growth momentum.
Sanjiv
Goenka, vice chairman of RPG Enterprises agreed with Piramal's views. "RBI had
to step in at some point to keep inflation under check," he said.While
appreciating RBI's action in the context of the current macro economic
situation, CII's director general, Chandrajit Banerjee said CII was concerned
about the cost of funds for industry, which should remain reasonable for growth
and recovery to become broad-based.
However, there is a strong case
for the spreads between reverse repo and repo rates to be narrowed to 1 per cent
from the current 1.50 per cent. "The reasons of RBI widening this corridor to
1.50 per cent two years back no longer exist and it would have been a welcome
move by RBI to leave repo rate unchanged at 5.25 per cent thus narrowing the
spreads to. 1.25 per cent," said Raghavan of Essar.
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