Will ease liquidity situation: industry

  Industry and commerce bodies on Tuesday hailed the cut in cash reserve ratio (CRR) by the Reserve Bank of India (RBI) by 50 basis points as a measure at restoring the growth trajectory by helping ease the liquidity situation in the banking system.

Confederation of Indian Industry (CII) Director-General Chandrajit Banerjee expected the new measure to ease liquidity situation which had remained tight since November 2011 and stressed that the RBI had recognised that the challenges to growth was on account of weakening demand condition.

Hailing the decision as bold, Mr. Banerjee agreed with the central bank's assessment that fiscal deficit posed a challenge and the government needed to address the issue and bring it down to 3 per cent over a five-year period and altogether eliminate revenue deficit within the same time span.

Associated Chambers of Commerce and Industry of India (Assocham) Secretary General D. S. Rawat said the RBI's action would release Rs.32,000 crore into the system and help fund viable projects held up due to liquidity crunch. He said the focus had now shifted from controlling inflation to restoring growth momentum and hoped the GDP during 2011-12 would touch 7 per cent.

Federation of Indian Chambers of Commerce and Industry (FICCI) President R. V. Kanoria said the cut in cash reserve ratio to 5.5 per cent was a welcome step but said that in view of the uncertain growth prognosis a cut in repo rate would have acted as a strong enabling factor in spurring investment activity.