By Netra Mittal
With the implementation of GST and the aftermath of demonetisation, the growing economy of India has entered a phase where growth is increasing at a very slow pace. Consequently, AASOCHAM among many others has begun demanding immediate change.
Boosting the economy
In his recommendations to the government, ASSOCHAM Secretary General, D S Rawat, urged the government to take a few out of ordinary steps like relaxing the fiscal deficit targets and increasing public spending to boost investment-led growth to revive consumer demand and create more jobs.
Additionally, prior to the credit policy review due on October 4, Rawat wrote to the RBI and Monetary Policy Committee to make cuts to the interest (repo) rates, by at least 25 basis points, given the current situation of the economy. He went on the say that the economy is facing multiple challenges as growth is slowing down and investment is not picking up and that consumers have cut down on spending and businesses have also lost momentum.”
Rate-cut on the charts?
Furthermore, given the high leverage causing a big drain on the balance sheets of a large number of companies, Rawat said that a cut in the lending rates will serve as a relieving factor to the different sectors of the economy. He stated that the RBI needed to come out with a special provision for loan recovery pertinent to the small and medium enterprises (SMEs) and mid-sized corporates, apart from the already-in-place directional guidelines.
The case for a rate-cut is evidently strong as there has been an ease in food inflation, from 0.31 to -2.12 percent. An expected reduction in food inflation due to the good monsoon forecasts and non-fluctuating crude oil prices have helped in maintaining a stable current account deficit.
A must take step
The deceleration in factory output growth could further bolster the case for a rate cut next month to boost Asia’s third-largest economy, which grew 6.1 percent in the January-March quarterits weakest pace in more than two years, the chamber said.
Given the problems that have surfaced after the GST coming into effect, Rawat believes it is even more crucial for the RBI to implement these changes now, to impede the slow growth rate India faces.
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