Thaindian News

New Delhi, July 28 (IANS) Welcoming the monetary policy announced by the apex bank Tuesday, India Inc expressed hope that the country’s economic growth will exceed the bank’s expectation of 6 percent this fiscal.
“The economy could grow at around 7 percent, as the fiscal and monetary measures have an impact on domestic demand,” said Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII).

The Reserve Bank of India (RBI) in the quarterly update of its monetary policy kept the key rates unchanged and cautioned that inflation rate can soon balloon to 5 percent.

“Monetary policy must remain accommodative in such an environment so as to ensure a revival in India’s growth path,” Banerjee added.

The Associated Chambers of Commerce and Industry (Assocham), another industry lobby, also welcomed the monetary policy.

“However, RBI should have taken some measures to strengthen the bond market by allowing FIIs (foreign institutional investors) to participate in it so as to ensure release of commercial papers, bond documents as currently these are being withheld by their subscribers,” Assocham president Sajjan Jindal said.

According to Moody’s Economy.com, the economic research arm of consultancy Moody’s, the central bank would keep monetary policy at the accommodative setting this fiscal to help the economy recover.

“Although the global climate is still a little unstable, cutting rates cannot help immediately boost domestic activity. Instead, policymakers are counting on previous rate cuts to influence market rates now,” said Sherman Chan, an economist at Economy.com.

“RBI will likely commence monetary tightening a year from now, as inflation may again emerge as a concern to policymakers.”

The wholesale price index is expected to return to positive territory by 2009-end as improving global economic conditions continue to put upward pressures on commodity prices, Moody’s said.