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RBI should not tighten monetary policy: India Inc

Expressing satisfaction over 8.9% economic growth in the second quarter, India Inc today said the Reserve Bank needed to ease the monetary policy to further boost industrial production.

business Updated: Nov 30, 2010 19:10 IST

Expressing satisfaction over 8.9% economic growth in the second quarter, India Inc on Tuesday said the Reserve Bank needed to ease the monetary policy to further boost industrial production.

"What is required is greater credit availability and reduction in high interest rates to stimulate manufacturing, construction, electricity, mining and other core sectors," trade apex body FICCI said.

Industrial growth of in July-September, 2010 period came down to 9.8% from 13% in the previous quarter.

Alongside construction, electricity, gas and water supply as well as mining and quarrying have also decelerated in second quarter over April-June period.

"This performance suggests that we should not tighten monetary policy any further," it said.

Reserve Bank of India is schedule to review the country's monetary policy next month.

The central bank has increased key policy rates six times this year.

To increase share of industrial production in the country's GDP, the government is in process of formulating a national manufacturing policy in consultation with different industry chambers like FICCI and CII.

CII too expressed concern on slowdown in industrial production but expressed satisfaction on recovery in agriculture and services sectors.

"As a result, we expect GDP growth to exceed 8.5% in 2010-11, making India one of the fastest growing countries in the world," CII Director General Chandrajit Banerjee said.

Another leading chamber ASSOCHAM said the impressive second quarter economic growth numbers could help India record an overall GDP expansion of over 9% this fiscal.

"The GDP numbers seem exciting and highly endorse the India's growth story," its president Swati Piramal said.

PHDCCI president Ashok Kajaria said given the weakening external demand and the need for fiscal consolidation at domestic front, "sustainability of current economic growth will tilt increasingly on private consumption and investment demand".