No cut in interest rates a big disappointment for India Inc: Seshagiri Rao, JSW Steel

In an interview with ET Now, Seshagiri Rao, Jt MD & Group CFO at JSW Steel, talks about the monetary policy announced today. Excerpts: 

ET Now: Did the RBI policy come as a big surprise? 

Seshagiri Rao: It is disappointing. Everyone is speaking about about headline inflation remaining high. RBI is mainly looking to reduce headline inflation. But fuel and food are mainly contributing to headline inflation. Food & fuel are mainly related to supply-side constraints. 

Right now, there is no pricing power in the industry, no growth at all. Every sector in the industry is suffering. Hence, there is a need to look at interest rate reduction. This is very disappointing for the industry. 

Whatever cash will come into the banking system through higher export refinance, I am not sure whether it will be passed on to the industry sector. As of today, there is a huge amount of liquidityconstraints on the retail side. 

So, companies which want to sell in the retail segment are not getting money at affordable interest rates. When the interest rate cut took place last time, we did not see any bank reducing the base lending rate. So, for the industry, interest rates remained high, even after the cut of 0.5% last time. 

As I mentioned to you, if companies want to access credit from the banking system today, taking into account headline inflation, the interest rates are relatively higher in India compared to other countries. 

So, the Reserve Bank of India should have reduced the policy rates and CRR. Lots of banks are talking about reducing interest rates if the CRR cut happens. Therefore, interest rates not being cut by the Reserve Bank of India is a big disappointment for the industry in my view. 

ET Now: Between last year and this year have you been in a position to raise prices while selling products? 

Seshagiri Rao: Prices have not really gone up in the Indian domestic markets. Domestic prices have not gone up in the steel sector as well. So, demand is not very robust. Real estate and construction sectors are also not doing well. Infrastructure is not doing well. 

Hence, the pricing power with the industry is very limited. In the current environment, where growth is low, IIPnumbers are bad and no investments are happening, it is essential to change the mood & sentiment. Whether there is a direct correlation between interest rates and investments is a different subject altogether. But a pep-up in sentiment is required by way of interest rate cuts.


Source:economictimes.indiatimes.com