India Inc. sees red in RBI policy

Corporate India said the Reserve Bank of India’s (RBI) move to control inflation by making credit expensive will impact growth and future projects could be reviewed.
Tough times are ahead for corporates who are facing challenges from spiralling input costs, reduced demand growth and, now, higher interest rates. With hardening of lending rates, margins of corporates will get further squeezed.
Said DD Rathi, whole time director and CFO, Grasim Industries: “We may miss out on the golden opportunity of registering strong growth.”
Rathi said he hoped the industry would not have to see a repeat of the 1998 cycle when interest rates were at a peak of around 14%. While corporates across the board would feel the heat, those companies which are over-leveraged would be worst affected.
Companies which have already tied up finances, may be able to sale through the tough times. But, those projects which are yet to achieve financial closure, could be reviewed or suffer delays.
“Companies will have to take a tough call on such future projects with credit getting costlier. Interest rates have already gone up by 2.5-3%. These will go up further by another 0.5-1%. Foreign markets too are not an option for raising funds.
Probe into early release
of policy
RBI governor YV Reddy said the central bank was investigating how his final scheduled quarterly monetary policy announcement was sent to media 30 minutes before the official statement. “There were some unusual developments. The web manager said it went out erroneously. We are making further enquiries to take necessary corrective measures,” Reddy said. BLOOMBERG