The headline inflation figures continue to grip RBI for a quick fix solution. The overall market perception continues to be that RBI may go in for increased policy rates-both repo as well as reverse repo by at least 50 bps each. However this is likely to impact growth momentum very adversely. ASSOCHAM strongly represents that higher dose of increased key rates may not be the solution as against more steps by RBI to ease liquidity for credit expansion.

The slow down blues in the economy have again spiked the sleep of the Government. The Food Inflation has knocked up prices of other goods, Industrial sluggishness brings growth to 2.7%, RBI has raised key interest rates six times this year to cool inflation but to utter discomfiture prompting lending rates going up and affecting demand and growth. The policy challenged government must speed up reforms in agriculture sector, infrastructure, and policy clarity for FIIs inflows. It is time the monetary policy instances are also supplemented by bold Fiscal as well as Administrative steps to improve supply chain bottlenecks for wider participation of farmers and consumption centers to rein in intermediateries from making quick buck. A National Policy to weed out inefficiencies, improve warehousing backward linkages with rewriting of Agriculture Marketing rules will improve supplies and farmer income.

Against these challenges faced by the economy and also that the growth momentum is not destined to be the ignored and sacrificed, there is a strong and valid case for the RBI to keep off any Monetary tightening agenda. ASSOCHAM and its members firmly believe that any meddling with the key policy rates at this critical juncture not only will derail seriously the growth curve which has been architected by the Government with care and compassion over the last few months. Of course ASSOCHAM looks forward to reduction in liquidity rates at least by 50 basis points to improve liquidity with banks and sustain credit growth. The need of the hour is to declog the supply side constraints and built up long term market infrastructure in Agriculture, enforce reforms in important sectors to prepare for the challenges the country is likely to face with GDP touching double digit.