New Delhi: Buoyed by an uptick in industrial output and easing inflation, India Inc said on Wednesday that improving economic data makes a strong case for a cut in interest rates.
Industry body CII said the upturn in industrial production underpins the perception that the growth momentum is positive for industry and the economy is showing early signs of revival based on the feel good factor and positive investor sentiment.
"We hope that going forward, the tentative signs of revival would transform into a firm recovery as overall business confidence is looking up and there is optimism about the change in governance conditions pertaining to the ease of doing business," said Chandrajit Banerjee, Director General of the Confederation of Indian Industry (CII).
Showing signs of recovery, industrial production growth perked up to a three-month high of 2.5 per cent in September mainly due better mining and manufacturing output and larger offtake of capital goods.
Besides, driven by softening prices of food items, the retail inflation in October declined further to 5.52 per cent, the lowest since the government started computing the new series of data in January 2012.
Welcoming the drop in retail inflation, CII hoped it would propel the Reserve Bank of India (RBI) to reduce policy rates in its forthcoming monetary policy especially as consumer demand continues to be tepid.
According to the IIP data, manufacturing - which constitutes over 75 per cent of the index - grew by 2.5 per cent in September, compared to 1.4 per cent a year ago. For April-September, the sector grew at 2 per cent, compared to 0.2 per cent growth in the year-ago period.
"It is heartening to see the positive growth of manufacturing in September which seems to be broad based too. We are hopeful that manufacturing growth will pick up in the coming months as a result of steps taken by the Government recently and also due to improved business sentiments," Ficci president-elect Jyotsna Suri said.
Pressing for a rate cut, Assocham Secretary General D S Rawat said, "There exists a certain need at this juncture to convince the monetary authority to reduce the policy rates, besides, these are the necessary conditions for ensuring the success of Make in India programme as well."
The Reserve Bank has lately started targeting retail inflation while deciding on its bi-monthly monetary policy. The apex bank has been targeting a retail inflation of 8 per cent by March 2015 and 6 per cent by March 2016. Its next monetary policy is due on December 2.
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