The Reserve Bank of India's (RBI) repo rate cut of 50 basis points brought some cheer for India Inc, with top honchos saying the decision would
boost business sentiment and revive investment and growth.
The central bank, for the first time in three years, cut its lending rate by 50 bps in its monetary policy review on Tuesday.
"It is a very good step because high interest rates were having negative impact on the country's economic growth," said Adi Godrej, chairman, Godrej Group.
"The cycle of repo cut has started and we
may see more cuts in future," Godrej, president-designate of the Confederation of Indian Industry (CII), told reporters.
PERSPECTIVE: Behind RBI's repo rate cut move The repo rate is the interest the central bank levies on short-term borrowings by commercial banks. The reverse repo rate is the interest on short-term lending. A cut in these rates reduces the cost of accessing funds for lending institutions.
The RBI's cut in repo rate will automatically see the reverse repo rate also drop to 7 per cent from 7.5 per cent.
"I am delighted," said Bajaj Auto Chairman Rahul Bajaj, adding the move would help boost investments and improve economic growth.
"While the
cut in policy rates by RBI is an encouraging move, we also need the government to push reforms as this would improve business sentiment and spur investments in the economy," said R V Kanoria, president, Federation of Indian Chambers of Commerce and Industry (Ficci).
Kanoria hoped the government would take positive measures that would
result in increased liquidity and not crowd out private investment as a result of high government borrowings.
PERSPECTIVE: No sudden gains from RBI's rate cut "The cut in repo rate by 50 basis points is a welcome move, which was much needed given that the GDP growth is moderating and IIP (index of industrial production) growth is declining," Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII), said about the RBI's annual monetary policy.
"The repo rate cut will provide the boost to investment as well as send a strong signal that turning around growth is of pivotal importance," Banerjee said.
A cut in repo and reverse repo rates also eases money supply in the system by making it more attractive for commercial banks not to park their funds with the RBI in the form of government securities, and instead lend it for commercial purposes.
"This has set the stage for cheaper lending costs and created an investment climate which could even possibly reverse inflationary pressures," said D.S. Rawat, secretary general, of Associated Chambers of Commerce and Industry (Assocham).
"High interest rates have been discouraging fresh investments and industrial production for nearly two years now. The RBI has acted vigorously to reverse the slowdown," Rawat said.
"This development will have a positive impact across the economy and particularly in the real-estate industry. Not only will the cost of borrowing rationalize, this reduction will also provide an impetus to growth and enhance business-confidence," said Ajay Chandra, managing director, Unitech.
With IANS inputs
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