New Delhi: Industry chamber, CII today warned that any further tightening of money supply by the Reserve Bank of India will trigger a slowdown of the economy.
“There are already emerging signals in the form of slowdown in the automotive sector and retail banking,” CII President R. Seshasayee said in a statement here.
He said while inflation control is legitimately at the top of the national agenda, “it is important that growth is not traded off in the bargain.”
The RBI recently announced another increase of 25 basis points in the repo rate (the rate at which RBI lends short-term money to banks) to 7.75% and increased the cash reserve ratio to 6.5% from 6%.
The central bank’s move would suck up Rs15,000 crore liquidity from the system.
The CII President said a large number of projects were in the pipeline and any more intervention by RBI could, “force companies to rethink their investment.”
He said if at all the central bank has to intervene it should be on a selective basis and restricted to the segments where overheating was felt. He also wanted that the RBI should not surprise the industry by sudden jerks.
The CII Chief said that the industry has to live with appreciation of the rupee even if it hurts exports. “While the supply side measures take effect, industry might have to except in the short term, appreciation of the rupee even if it means that exports are hurt a bit.”
He hoped that the industry would improve productivity and competitiveness in the face of adverse exchange rate.
For improving the supply side constraints, post grain harvest measures like cold chain infrastructure should be built in and over the medium term, agricultural productivity must match the ever increasing demand, he said.