As the process of demonetization to remonetization has created tremendous liquidity, at this juncture, RBI should cut repo rate in line with cut in deposit rates in the forthcoming Bi-monthly monetary policy due on 7th December 2016, said Gopal Jiwarajka, President, PHD Chamber of Commerce and Industry.
Industry, businesses, and people are facing the impact of higher interest rates since the last many years.
The high-interest rate regime has impacted not only the sentiments of businesses but also has significantly impacted the demand in the economy, majorly in the rural segments, said Jiwarajka.
The economy should be supported by lower interest rates in order to enhance the aggregate demand and to boost up the manufacturing sector as inflation has significantly come down at around 5%, he said.
Lower interest rates would generate demand, enhance production possibilities and employment creation in the economy, said jiwarajka.
Mr. Gopal Jiwarajka said that cost of credit to businesses is very high as compared with many competitive economies, impacting not only domestic competitiveness but also a comparative advantage in the international markets.
India’s repo rate at 6.25% is significantly higher as compared with the world’s 5 largest manufacturing countries including China (4.35%), United States of America (0.5%), Japan (-0.1%), Germany (0) and the Republic of Korea (1.25%).
Other competitive economies such as Thailand (1.5%), Hong Kong (0.75%), Malaysia (3%), Singapore (0.12%), and Taiwan (1.38%) are significantly better than India in terms of cost of credit, said Mr. Gopal Jiwarajka.
Going ahead, we expect a significant cut in repo rate to facilitate the competitiveness of the manufacturing sector not only in order to compete in the international market but also to create a level playing field at the domestic front , opined Mr. Gopal Jiwarajka.