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CII Recommends Moderation in Further Tightening:

CII appreciates RBI’s concerns about rising inflation, which has made it increase the policy rates by 25 basis points and reduce liquidity through a simultaneous increase in the Cash Reserve Ratio. According to Mr Venu Srinivasan, President, CII, “given that industrial growth and investments are picking up, the RBI will need to calibrate further tightening going forward. Such moderation will be required in order to support growth through the availability of funds at a reasonable rate. CII believes that the RBI is aware of the challenges faced by industry at a time when credit growth is picking up and capacity expansions are taking place.”

The CII President said that CII is in agreement with the RBI’s outlook for growth and inflation over the coming year. The RBI’s projection of 8.0% GDP growth with an upside bias for 2010-11 is in line with the 8.0 – 8.5% projected by CII. Indeed, even stronger growth is possible if the financial and business environment remains conducive and firms are able to expand capacities at a rapid rate, the release said. As for inflation, CII believes that the RBI’s baseline projection of 5.5% WPI inflation for March 2011 is achievable with an easing in some of the supply side factors that drove up food prices last year.

CII also appreciates some of the initiatives taken by the RBI to modify regulatory policies to make them more supportive of growth and inclusion. In particular, the steps taken to boost lending to MSMEs and infrastructure and relax the guidelines for bank correspondents are in line with interventions sought by CII, the release said.

Source:http://www.cii.in/PressreleasesDetail.aspx?enc=/sXaac5/AJiqdEffWlX0E7zH4JrifgrBpNkHvTz1mciNdCRNkFvC8/ufXDekvV0bFmbSuPaluEl70Pq/gF7NUJTl0rw9IuLRjfiLgzfpJOxcAP3nYOZUyDc5Ru4tnzNW5tX7gIa9Q2yOQiD2+caKnQ==