Construction and infrastructure sector players have termed the repo rate cut by 25 basis points a positive step but say nothing has been done to directly address their liquidity concerns.

While some players in the sector merely welcomed the move, others want the RBI to take the lead in helping them accelerate growth.

E. Sudhir Reddy, Chairman and Managing Director, IVRCL, told Business Line that the policy announcement adds to the feel-good factor, though the Governor could have done a lot more, given that inflation seems to be under control now.

Isaac A. George, Director of Finance, GVK Group, said: “That the Governor reduced the repo rate by .25 per cent was on expected lines. But nothing much has been done to address the liquidity crunch.”

“While the policy announcement augurs well from the business sentiment viewpoint, many more changes need to be brought in to address various issues confronting the infrastructure sector,” he said.

M. Goutham Reddy, Executive Director of Ramky Infra, said: “This cut in repo rate is too small in the present context. Many in the industry were expecting it could be cut by about 50 basis points to help accelerate growth in the sector.”

Benefits not passed on

“Liquidity in the infrastructure sector continues to be a cause for concern and nothing has really been done to address this. This will impact investments,” he said.

Binu Joseph of JRG Securities said the key rate has been cut by about 1.25 per cent since last year but banks have not fully passed on the benefits to the sector, expressing their inability to do so in the current economic environment.

The RBI Governor’s refusal to change the CRR on the ground that there is enough liquidity continues to be a matter of concern for the industry. “In fact, he is left with two more policy announcements before stepping down. We need to wait and watch,” he said.

If the Government’s objective is to revive infra growth, a bigger cut would have helped, another industrialist said.

With inflation likely to firm up during second half of the current financial year, the scope to tinker with policy will again be reduced, Binu Joseph said.

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said: “The third round of reduction in repo rates during the year, bringing it to 7.25 per cent is a positive move for home buyers.”

“Even a minor reduction in interest rates is optimistic for the sector though it may not lead to a big resurgence as structural inefficiencies in infrastructure and policy remain,” he added.

Stronger signal

Hemant Kanoria, CMD, Srei Infrastructure Finance Limited, said: “To revive growth in the infrastructure and manufacturing sectors, the impact of a policy rate cut of 100 basis points would have been dramatic; it would have sent out a far stronger signal that interest rates are coming down.”

“We hope to see more cuts in policy rates and in the cash reserve ratio during the upcoming reviews and that will set the stage for a strong growth recovery,” he said.

> rishikumar.vundi@thehindu.co.in

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