Two contrasting statements issued by the Federation of Indian Chambers of Commerce and Industry (FICCI) over the increase in repo rate by 25 basis points by Reserve Bank of India (RBI) on Wednesday became a flashpoint of controversy.
A journalist who raised this issue on social media was allegedly asked by the industry body to delete the tweet questioning FICCI.
The events unfolded on Wednesday when the trade body released a statement to the media stating, “Interest rate hike will impact business confidence”. The statement quoting FICCI President Rashesh Shah was issued by the public relations team of the organisation at 6.24 pm. Just an hour later, at 7.21 pm, another statement followed. FICCI’s new statement read: “RBI monetary policy stance positive for growth revival”.
Baffled by FICCI’s U-turn, that too without any clarification on the reason, Arindam Majumder, a Delhi-based journalist with Business Standard newspaper, tweeted the two contrasting statements.
Spot the difference contest: Mr @rasheshshah and @ficci_india had a swift change in heart about this the RBI rate hike will impact the industry #RBIPolicy pic.twitter.com/oZdJWthyKS
— Arindam Majumder (@ari_maj) June 6, 2018
He posted both the press statements with the caption: “Spot the difference contest: Mr @Rasheshshah and @Ficci_India had swift change in heart about this the RBI rate hike will impact the industry” (sic).
Two much information
The first statement issued by FICCI that quoted the announcement by Rashesh Shah read, “Today’s 25 bps rise in repo rate signals the hawkish stance of the RBI at a time when the economy needs support to maintain the pace of recovery. Recovery in Indian economy that has come on the back of structural reforms like GST, Bankruptcy Code and RERA is still nascent, and investments have only recently started to see an uptick; this hike in interest rate would impact the animal spirits and confidence of businesses that have been asking for lowering of cost of finance.”
The press statement further read: “The improvement in growth seen lately needs to be supported to ensure a firm turnaround of economy with capability of sustained high growth. In an environment with banks turning more risk averse, access to credit is increasingly becoming difficult, especially for MSMEs. Increase in interest rate will only worsen the situation. It has been estimated that MSME financing gap in India is almost 11% of GDP. Accessible and affordable finance is the only way to narrow this gap, which will not only improve MSME health but also contribute effectively to economic output.”
Shortly after issuing this statement, FICCI had a change of heart as it shot off another statement quoting Shah.
25 bps rise in repo rate by @RBI today is based on ground realities: President @rasheshshah on the latest monetary policy print. pic.twitter.com/drMYPwqqlk
— FICCI (@ficci_india) June 6, 2018
The new press release read, “Today’s 25 bps rise in repo rate by RBI is based on the ground realities and it indicates towards the positive sentiments in the economy. Recovery in Indian economy that has come on the back of structural reforms like GST, Bankruptcy Code and RERA is firming up, and investments have started to see an uptick; RBI stance would boost the animal spirits and confidence of businesses.”
It also read “the improvement in growth seen lately needs to be supported to ensure a firm turnaround of economy with capability of sustained high growth. The manageable inflation situation and optimism in the economy is set to continue going ahead and the GDP growth rate in the current financial year would be around 7.5%.”
In its bi-monthly monetary policy, RBI hiked the repo rate by 25 basis points to 6.25 per cent. The rise would result in banks raising their marginal cost-based lending rates.
FICCI under RBI pressure?
Majumder’s timely tweet immediately caught the attention of social media with multiple retweets and likes.
“I was amazed as to how a premier organisation like FICCI could budge in front of RBI and change its stand within minutes. This was something major and I couldn’t close my eyes,” he said.
Majumder also claimed that someone from FICCI called him up and asked him to delete the tweet but he did not budge.
FICCI president runs one of India’s largest financial services company Edelweiss Group, which is into the business of credit, asset management, mutual funds, wealth management and financial advisory services.
FICCI denies validity of first press release
FICCI’s senior director Santosh Tiwari told this correspondent that only the second press statement issued by the organisation was official. “I do not know if any other release was sent but the final and official press release is also present on the website of FICCI. Our stand is expressed in the final press statement sent to the media,” he said. When asked if a FICCI official had asked Majumder to delete his tweet, he said someone from FICCI’s media team might have requested the journalist to delete the tweet but he was not sure of this.
Established in 1927, FICCI is often regarded as the voice of Indian business ecosystem as it is the largest and the oldest association of business organisations in India.
Professor Lalit Magotra, a former member of Press Council of India (PCI), said FICCI should issue a clarification as to why they first released a press statement criticising the rise in repo rate and then another one favouring it. “It is the moral responsibility of FICCI to tell investors as well as business groups as to why their statement was changed. It could have happened after FICCI got some new facts or figures but a clarification is needed. On part of the journalist, he did not write anything factious on his Twitter account. He backed it with the picture of press releases,” he said.
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