Industry body Assocham on Tuesday urged the RBI to cut cash reserve ratio (CRR) by another 75 basis points and repo rate, the level at which banks borrow from the apex bank, by 50 basis points. CRR is the amount of funds banks have to necessarily park with the RBI.
"The economy is going through a very difficult patch and business confidence has plummeted. New investments have slowed down," Assocham President Rajkumar Dhoot said during his interaction with RBI Governor D Subbarao ahead of the central bank's monetary policy review scheduled on April 17.
Dhoot said that the industry particularly manufacturing sector has been affected due to
high input and capital costs.
"The RBI's monetary tightening has added to the low business confidence and affected financial bottomlines, leading to deceleration in investments," Dhoot said.
On March 10, the RBI had cut CRR from 5.5 per cent to 4.75 per cent. "There is a need to cut it further by 75 basis points". One basis point is one-hundredth of a percentage point.
While MSME sector continues to struggle for bank credit, "repo rates too should be reduced by 50 basis points to squeeze cost of borrowings, encourage investments and boost growth," he added.
An HSBC survey has said that growth of India's manufacturing sector has witnessed decline in March, three months in a row, as output and new order growth weakened.
