Money & Banking

India Inc welcomes RBI move; says rate cut will spur growth

PTI New Delhi | Updated on October 04, 2019

The reduction in key policy rate by the RBI is expected to revive investment and encourage consumption, thereby kick-starting the sluggish economy, India Inc said on Friday.

Industry’s reaction came as the central bank slashed its benchmark lending rate by 0.25 percentage points to 5.15 per cent. The industry emphasised that it was now critical for banks to facilitate a faster transmission of rate cuts to ensure that the measures reap results.

CII Director General Chandrajit Banerjee said that the cumulative 135 basis points rate cuts this year, along with a slew of measures announced by the government to provide growth stimulus to a variety of sectors, is expected to lift growth from its current stupor and unleash animal spirits.

Incentivising investment and consumption

PHD Chamber of Commerce and Industry President DK Aggarwal said that Friday’s repo rate cut will help induce demand and refuel economic growth in coming quarters. “This further reduction of repo rate will not only bring down the lending rates but also incentivise investment and boost consumption,” said Surendra Hiranandani, CMD, House of Hiranandani.

The RBI’s latest move to trim repo rate comes at a time when the economic growth has hit a six-year low of 5 per cent. This is the fifth straight rate cut by the central bank in as many policy reviews in 2019, and takes the total quantum of reductions to 1.35 per cent.

Exporters body FIEO’s President Sharad Saraf, however, said that the challenges in exports will continue and may aggravate with geo-political situation.

Muthoot Pappachan Group CMD Thomas John Muthoot said for the common man to get the benefits of these cuts, it is important that banks ease the challenges for NBFCs to get funding from them, eventually pushing consumer sentiment.

“The rate cut is expected to complement other fiscal measures, such as the corporate tax rate cut that was announced last month to propel GDP growth,” said Anshuman Magazine, Chairman & CEO, India, South East Asia, West Asia & Africa, CBRE.

Growth concerns

RBL Bank economist Rajni Thakur said the central bank is reaching its lower bound of policy space and has tried to steer support expectations away from monetary side, adding that it does not see more than 15-40 basis points additional cuts in this cycle.

Given the concerns on growth and inflation remaining within the target levels, a majority of analysts were expecting the RBI to cut rates at the policy review meet.

Published on October 04, 2019

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