FICCI stated that given the fact that oil market is plagued by risk of high and low price cycles as a result of demand and supply shocks, in such circumstances,
WPI INFLATION NUMBERS
Commenting on the latest WPI based inflation numbers, FICCI said that the pressure which was seen arising from the food segment seems to be moderating, with prices of vegetables and fruits reporting a decline. Further, recent meteorological prediction indicates expectation of normal rainfall this year which is a huge positive. With recovery in the global economy still weak, key commodity prices remain suppressed.
RATE REDUCTION BY RBI
Welcoming the reduction in repo rate by 25 bps, FICCI said that RBI’s decision to cut the repo rate and follow accommodative monetary policy stance is a positive step, given the favourable conditions with respect to inflation and fiscal stability. FICCI has for long advocated the need for greater cuts in the policy rate to stimulate demand and investments in the economy.
Additionally, several steps announced to ease liquidity should help in effective transmission into lending rates by the banks. The banks already have enough room to pare the lending rates owing to recent reduction in small savings interest rate upto 1.3 per cent as well as the introduction of the marginal cost of funds based lending rate (MCLR).