'Re-examine RBI's anti-inflationary measures'

NEW DELHI, INDIA: The Federation of Indian Export Organisations (FIEO) on Thursday urged the Reserve Bank Of India (RBI) to re-examine its policy to use monetary measures to tame inflation.

The request comes ahead of RBI's monetary policy review scheduled on September 16.

FIEO president Ramu S Deora said in a press statement that India should take a cue from Brazil which has actually reduced repo rates notwithstanding inflation which is also beyond its comfort zone.

India's EXIM policy for 2010-2011

“This is also substantiated by the UNCTAD which lay emphasis that the policy to control inflation was to rely on an income policy that aims to check inflationary pressures instead of on a monetary policy,” he added.

According to FIEO chief, the economic slowdown is expected to continue if the RBI continues to raise interest rates in the hope of reigning in inflation which stood at around 9.22 per cent, well above the RBI's target rate of 4 per cent to 4.5 per cent.

India's economy grew 7.7 per cent in the the first quarter of the current fiscal, compared with the same period of 2010 and it was the weakest for the last six quarters.

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Ate present, gross fixed capital formation is at its lowest ebb at 7.9 per cent y-o-y lower than 11.9 per cent a year ago and as a result of increasing input costs the pace of industrial growth slowed to 5.1 per cent y-o-y from 6.1 per cent in the previous quarter.

“Construction slumped to 1.2 per cent, agricultural GDP slowed to 3.9 per cent but these figures were offset by growth in services at 10 per cent y-o-y. Situation on the global front is equally grim. The pace of global recovery has been slowing down in 2011. Global GDP is expected to grow by 3.1 per cent as reported by UNCTAD, following an increase of 3.9 per cent in 2010,” FIEO said.

Deora said that despite the slowing momentum of growth, prices continue to rise unabated and one can anticipate an aggravated decline in growth momentum as a result of lagged impact of interest rate hikes bulk of which came in June and July.