Industry body CII said the time is opportune for the Reserve Bank to cut interest rates as inflation is likely to remain at moderate levels.
"The RBI and the Monetary Policy Committee are being cautious in not recognising the significant decline in inflation. Global commodity prices have moderated and food prices are down," CII Director General Chandrajit Banerjee told PTI.
On the performance of the Narendra Modi led NDA government, which completed three years in office, Banerjee said there is now optimism that economic growth will accelerate, macro-stability will continue and inefficiencies in the economy will be brought down.
"The many steps taken to attract foreign investment have borne fruit. In industry, we are confident that the investment cycle will pick up soon," the CII director general said in an e-mail response.
He said the businesses and government need to work together to build a strategy for a stronger economic base.
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The macroeconomic impact of introduction of the Goods and Service Tax (GST) could turn out to be significant in the years ahead, the Reserve Bank of India (RBI) recently said in its report titled 'State Finances: A study of Budgets of 2016-17'.
It said that GST implementation is likely to boost the small and medium scale enterprises (SME) sector by (i) improving their ease of doing business; (ii) lowering logistical costs; (iii) extending outreach beyond state borders; and (iv) aiding SMEs dealing in sales and services.
Furthermore, economic activity would also benefit from exports becoming more competitive as the GST regime will eliminate the cascading impact of taxes, it added.
The report clarifies that besides giving a major boost to tax revenue, the larger impact on the fiscal health would be from reduction in the administrative compliance cost. GST is likely to be supportive of fiscal consolidation without compromising capital expenditure.
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