Rate cut to boost investment amid ‘growth woes’: India Inc

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New Delhi: RBI’s decision to lower benchmark interest rate will boost investment and buttress consumer spending amid “growth concerns”, provided banks transmit the reduction, industry bodies said today.


The central bank also revised downwards its GDP growth forecast for 2019-20 to 7.2% from 7.4% predicted in the February policy.


Ficci president Sandip Somany said Ficci had “expected a larger rate cut given benign inflation and slowing industrial as well as exports growth and liquidity concerns”, while PHDCCI president Rajeev Talwar said there is a scope of further reduction.


The RBI today lowered the key interest rate by 0.25 percentage points to 6%, the second cut in a row, in an attempt to propel economy ahead of General Election.


“It demonstrates the renewed focus of RBI on strengthening the growth metrics at a time of benign inflation footprint and growth concerns,” CII Director General Chandrajit Banerjee said on the RBI’s move.


He hoped that banks will transmit the reduction in repo rate so that actual lending rates decline.


Somany too expressed hope that the two consecutive cuts in repo rate would translate into lower lending rates for both retail and corporate credit.


He stressed that it was crucial for banks to transmit the rate cut as Ficci does not foresee much impetus coming from external sources of growth while global economy continues to show signs of moderation.


“The real repo rate has remained high for a long time and there is a scope of further reduction. We do hope that RBI shall continue the accommodative stance in subsequent months as well,” Somany said.


Talwar said the transmission of the policy rate cut by the banking sector in terms of reduced lending rates would be crucial to induce demand and industrial growth in the country.

(Except for the headline, this story has not been edited by The Kashmir Monitor staff and is published from a syndicated feed.)

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