NEW Delhi: Unhappy over the RBI's more than expected 75 basis point hike in CRR to squeeze money supply, India Inc on Friday cautioned that economic growth will be hit if accommodative monetary stance is reversed hastily.
"...The tipping point has not yet arrived for tightening of the monetary policy and if one proceeds in that direction hastily, economic growth is bound to take a hit. This, in turn, will effect employment generation that is critical at this juncture," FI CCI President, Mr Harsh Pati Singhania said.
He said the RBI's move signals a further tightening of the monetary policy regime. A FICCI statement said that SMEs are still borrowing at around 13 per cent, exports have contracted by nearly 20 per cent during October 2008 and October 2009 and imports are down by 21 per cent during the same period.
"Therefore...it is still premature to signal a tightening of the monetary policy and has cautioned that if this is complemented with fiscal tightening, the results would be disastrous," it said.
The Reserve Bank of India has increased CRR- the bank deposits kept with the RBI-- 75 basis points. However, short term lending and borrowing rates between RBI and banks were kept unchanged. - PTI