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Cut lending rates to spur industrial growth: Survey

Last Updated: Sunday, July 1, 2012 - 18:04

New Delhi: The Reserve Bank should immediately cut policy rates by 1- 1.5 percent as high interest rates are impacting the business of small and medium units, says a survey by industry chamber Assocham.

A majority of small and medium units surveyed said high interest rates are impacting their business and RBI should immediately cut interest rates between 1 percent and 1.5 percent to help revive the growth of the industry, Assocham said.

Over 90 percent of respondents said the Reserve Bank of India (RBI) decision to keep interest rate unchanged was completely out of line, it said.

"High rate of interests have a negative impact on business as the organisations droop under the burden of ever-rising lending rates," the survey said.

However, the rest of respondents said no cut in rates will not impact their trade much as they are not heavily dependent upon bank finances, it said.

The chamber said it has surveyed about 100 SMEs across the country.

In its mid-quarterly review of the monetary policy on June 18, RBI has kept policy rates unchanged in view of rising inflation and global economic uncertainty.

The survey said rising raw-material cost and high interest rates have put pressure on small and medium enterprises (SMEs) profits margins.

"The SME sector had already been grappling with macro-economic slowdown together with global uncertainty and rising interest rates. This has put an extra burden on the small capital organisations which are heavily dependent upon the banks for their finance requirements," Assocham Secretary General D S Rawat said.

Further, the survey said, most of the firms said high rates have adversely affected their investment plans.

The Micro, Small and Medium Enterprises (MSMEs) sector, which contributes 45 percent to the country's manufacturing output and 40 percent of the total exports, employs over 6 crore people.


First Published: Sunday, July 1, 2012 - 18:04
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