Need more steps to ease liquidity squeeze, says demand-recession hit India Inc.

"The RBI (must) further ease the monetary policy to aid the industrial sector. Further, in view of the evolving situation the banks must shed their conservative stance with regard to lending to corporates and consumers. The banks must lower the lending rates to single digit levels if economic activity is to be stimulated. In fact the RBI and the government should embolden and incentivize the banks to direct resources for productive purposes," he added.

Sajjan Jindal, president of the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said that despite inflation rate slipping to a record 0.44 percent, its reflection on primary food articles was yet to noticed because the weightage of inflation on them was still between 6-7 percent.

The reduced inflation had shown its impact on prices of metals especially copper, zinc, aluminium and even in steel and cement and also manufactured goods whose prices had come down, Jindal said.

However, "The impact of lower inflation has yet to come to primary food articles. The only concern is that the common man is yet to benefit from this record inflation rate. It is likely to take some time," Jindal said.

"It will take some time to reduce the weightage of inflation on prices of essential commodities," he said, adding that only a sharp decline in food prices would help close the gap between the wholesale and consumer price indexes.

According to Confederation of Indian Industry (CII) director general Chandrajit Banerjee, "a lack of demand with high levels of inventory...has led to downward pressure on commodity prices."