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Indian industry urges rate cuts to boost economy

Indian industry urges rate cuts to boost economy
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First Published: Wed, Jan 23 2008. 12 25 PM IST
Updated: Wed, Jan 23 2008. 12 25 PM IST
New Delhi: A top Indian industry lobby group on Wednesday urged the central bank to cut interest rates to strengthen domestic economic fundamentals against the backdrop of an uncertain global environment.
The US Federal Reserve cut its benchmark interest rate by 75 basis points on Tuesday, its biggest reduction in the target lending rate in 23 years, in an unusual inter-meeting move to try to head off a US recession.
The Reserve Bank of India (RBI) reviews policy on 29 January.
Fear of a US recession has led to a global rout of stocks. The Indian stock market has fallen for seven consecutive sessions. On Tuesday, the market fell nearly 13% percent during the day before closing down 5%.
“With inflation under control and hovering around 3%, it is a right time for the RBI to cut the repo and the reverse repo rates by 25 to 50 basis points,” Confederation of Indian Industry (CII) President Sunil Bharti Mittal was quoted as saying in a statement.
“This move would strengthen the economic fundamentals and also boost investors’ confidence.”
Analysts polled by Reuters before the US rate cut, expected the RBI would hold rates steady at its review.
Five interest rate increases since June 2006 are biting, with consumer goods production slowing and sales of interest-rate sensitive two-wheelers soft.
Mittal said reducing interest rates would go a long way in boosting demand and investment. India needs to keep investment rates in excess of 36% of gross domestic product to achieve 9-10% economic growth, the statement said.
The Indian economy has grown at an average 8.6% in the past four years and is poised to grow at a similar pace in the fiscal year that ends in March.
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First Published: Wed, Jan 23 2008. 12 25 PM IST