Steps to infuse liquidity not enough: FicciOctober 23rd, 2008 - 6:14 pm ICT by IANS
New Delhi, Oct 23 (IANS) The Federation of Indian Chambers of Commerce and Industry (Ficci), a leading industry group, Thursday said measures taken by the government to control economic slowdown and infuse liquidity into the system were not enough in the current scenario.”Liquidity that has been infused into the market following cuts in cash reserve ratio (CRR) will be absorbed to meet the outstanding commitments and there is an immediate need to inject more liquidity,” Ficci president and parliamentarian Rajeev Chandrashekhar told reporters after the chamber’s executive committee met here to discuss the economic scenario.
Chandrashekhar said the central bank must further cut CRR from 6.5 percent at present to 4.5 percent, its 2006 level, and the repo rate by another 50 basis points to 5 percent.
The government recently lowered the CRR, a move that is expected to infuse Rs.1,000 billion into the system.
“While steps of liquidity infusion, repo rate cuts and opening of external commercial borrowings (ECBs) are all welcome steps, these are not enough the current circumstances and global scenario,” Chandrashekhar said.
Ficci was of the view that the tight monetary policy leading to liquidity drying up was a threat to the real economy.
“Do not focus on stock market alone, focus on real economy,” the Ficci president suggested, adding that India was in the middle of significant investment and expansion cycle - where businesses need access to capital, equity and credit. Disruption of this would have serious consequences, he added.
Ficci has also urged government to reduce railway freight charges, provide Rs.500 billion to banks for agriculture loans, besides immediate refunding to exporters by the excise department.
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Tags: agriculture loans, cash reserve ratio, chambers of commerce and industry, chandrashekhar, economic slowdown, external commercial borrowings, global scenario, indian chambers of commerce, railway freight, tight monetary policy