New Delhi: Reeling under slowdown, India Inc on Tuesday hailed Reserve Bank's move to reduce repo rate and CRR by a quarter percent, saying it will spur growth and ease the prevailing tight liquidity condition. Welcoming the RBI move, leading industry body CII said it will help the sentiment of both consumers and investors alike.
"It is a positive step which will infuse liquidity and help in catalysing growth," Industry Minister Anand Sharma said in Agra.
Industry houses are emphatic with the RBI pruning repo rate and CRR by 0.25 percent each after a long nine months in its third quarter monetary policy review.
"It was much needed given that GDP growth is moderating and industrial production is decelerating month after month. The rate cut is an encouraging move when high interest rates were having negative impact on the country's economic growth," JSW Steel Joint Managing Director and CFO Seshagiri Rao said.
Ficci's banker President Naina Lal Kidwai said, "This will hopefully help in reversing the anaemic industrial growth observed over the last year."
"In fact high borrowings under the LAF window seen in the recent past clearly reflected the tight liquidity situation. Release of Rs 18,000 crore with CRR cut of 25 basis points will help in easing the funds flow situation," she said.
Assocham President R N Dhoot said: "The reduction is a step in the right direction. However, the system has to take this in the true spirit and the benefits have to be passed on to the end users."
Apparel Export Promotion Council's Chairman A Sakthivel said, "The tight liquidity condition which was prevailing since long will surely ease out. It will, in turn, boost our economy and robust the structural deficit in the system by infusing the permanent primary liquidity in the system."
"A weak consumption and investment demand has been derailing the growth momentum of the economy and on Tuesday's announcement would help improve consumer and investor sentiments," said CII Director General Chandrajit Banerjee.
"The Government has already started to take necessary actions to ensure that the growth process can be revived. Industry draws heart from the fact that the RBI has also now demonstrated that it is also aligned with the government in getting growth back," he added.
Federation of Indian Export Organsiations (FIEO) Chief M Rafeeque Ahmed said the combined impact of repo rate and CRR cuts might see some upsurge of bank credit to industry which had decelerated.
He also expects a reversal in the average industrial production growth which was 1.075 percent in the first eight months of the current fiscal, lower than 3.95 percent clocked in the same period of the previous year.
ICC India's President Harsh P Singhania said RBI's decision to cut policy rates signals a move towards a monetary environment to reviving growth while reduction in CRR would exert downward pressure on interest rates.
"It is significant to note that RBI is concerned with the loss of growth momentum. With the right coordination between fiscal and monetary policies, we hope to see the beginning of softening of interest rates," he said.
Arun Singh, an economist with Dun & Bradstreet, said the RBI's shift in monetary policy stance to arrest loss of growth momentum coupled with the government's reforms measures was expected to further boost the sentiment of the business community and support investment activity in the economy.
While a cut in repo rate was widely anticipated, only a commensurate lowering of lending rates by the banks might lead to a pick-up in the credit demand going ahead, he added.
"The repo rate reduction will facilitate banks and housing finance companies to reduce home loan rates marginally which will benefit consumers," said S Sridhar, Advisor RICS-South Asia.
Fitch Group firm India Ratings and Research said the RBI move would have positive impact of rate sensitive sectors such as housing, consumer goods and automobiles.
"The crucial question is whether monetary easing will lead to sustained investment growth revival and thus economic growth? Low interest rate is a necessary but not a sufficient condition for investment demand," said its Chief Economist D K Pant.
New Delhi: Reeling under slowdown, India Inc on Tuesday hailed Reserve Bank's move to reduce repo rate and CRR by a quarter percent, saying it will spur growth and ease the prevailing tight liquidity condition.
Welcoming the RBI move, leading industry body CII said it will help the sentiment of both consumers and investors alike.