New Delhi, Feb 1: At a time when central banks in most parts of the world are going to new lengths to ease money and push growth, the ASSOCHAM expects the Reserve Bank of India (RBI) to at least take note of the fact for well over a year, the Wholesale Price Index (WPI) for several industrial products has remained in a deflationary mode, requiring an urgent infusion of life -saving consumer demand. “A whole lot of manufactured products including cotton textiles, manmade products, chemicals and organics, rubber -plastics, iron and semis, have suffered deflation,” said ASSOCHAM President Sunil Kanoria. “Besides, there are several other items such as leather and leather products and machine tools which are near zero inflation reflecting poor demand and virtually no pricing power left with the manufacturers.
It is almost a distress situation,” added Kanoria, seeking cut in interest rates in the policy Repo by the RBI. He said while the RBI is certainly not expected to go anywhere near the western central bankers, who are going to the other extreme positions of zero or negative interest rates, Dr Raghuram Rajan can be a little more accommodative with the monetary policy to boost the economic growth, particularly in the industrial production. The Index of Industrial Production ( IIP) declined by annualized 3.2 percent in November, 2015. (Also Read: Oil price crash to hit remittances from Gulf: Assocham)
The cumulative growth for the period April-November 2015 over the corresponding period of the previous year stood at mere 3.9 percent. Mining, manufacturing and electricity sectors continue to remain in distress. “In fact, when it comes to WPI, it is time the RBI started setting target for at least 3-4 percent inflation over the next two quarters. We cannot afford deflation for long. Looking at only Consumer Price Index alone will not be a wise policy,” the ASSOCHAM said. RBI was also impressed to further exert pressure on the banks to adequately pass on the previous cuts in the interest rates. “Even though the policy rates have been cut by up to 125 basis points in the last one year, there are still industries particularly at the SME level, which are still given loans by banks at 13-14 percent.