India Inc welcomes cut in key lending rates

New Delhi, March 4:

India Inc Wednesday welcomed the central bank’s surprise decision to reduce key lending rates by 25 basis points.

“Coming on the back of a growth-oriented budget, the unexpected cut in headline interest rate by the RBI sends a huge positive signal,” said Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).

“Clearly the government’s intent is asset creation and therefore, a delay in one year in the fiscal consolidation road map should be viewed through the glasses of overall macroeconomic objectives.”

Banerjee concluded that the overall sound macroeconomic management and the clearly spelt out targets for fiscal deficit should allow the international ratings rating agencies to take a positive view of investment climate in India.

Federation of Indian Chambers of Commerce and Industry (FICCI) too welcomed the surprise rate cut and said that it signifies that inflationary impulses are weakening in the economy at a faster pace.

“Given the cut in the policy rate, we now hope to see transmission of this move in the form of lowering of lending rates by the banks for investment and consumer loans,” said Jyotsna Suri, president, FICCI.

“As measures announced in the budget take effect, we could see an improvement in capacity utilisation. Lower lending rates by banks would provide an impetus to this trend and contribute to overall recovery in the economy,” she said.

Another business body the Associated Chambers of Commerce and Industry of India (ASSOCHAM) called the rate cut ‘a pleasant surprise’ and said that it will boost the morale of the consumers as also cut the interest costs of the industry.

“While the economic revival is visible, as the RBI itself, has recognised that there are still low measures of growth in production, credit, imports and capacity utilization,” said Rana Kapoor, president, ASSOCHAM.

Another business body PHD Chamber of Commerce and Industry said that Wednesday’s rate cut will benefit the common man with softening of EMIs on loans and the ripple effect t will also improve market sentiment and enable businesses to raise equity.

“Inducing demand scenario would be critical to re-fuel our economic growth trajectory and create jobs for millions of young work force. While containing the inflation, demand in the economy should remain intact,” said Alok B. Shriram, president, PHD Chamber of Commerce and Industry.

Describing the RBI’s announcement of repo rate cut as “an excellent move”, realtors apex body Confederation of Real Estate Developers’ Associations of India (CREDAI)Chairman Lalit Kumar Jain said that this should help the industry and business in general to tackle liquidity crisis.

Jain pointed out that several projects have been delayed due to financial crunch; hence restructuring should be permitted in current scenario. It is about time that the banks opened their doors to help the key sectors tide over the crisis.

Angel Broking’s chairman and managing director Dinesh Thakkar said that the surprise rate cut was in line with its expectations of a sharp rate-cutting cycle over the coming quarters.

“Having got the comfort in the budget of the government’s commitment to high quality fiscal consolidation, in our view, the RBI is likely to embark on an extended monetary easing cycle, with at least another 50-75 basis points more of rate cuts in FY2016,” Thakkar said.

Thakkar added that given the stronger rupee and substantial global monetary easing the RBI is finally in a position to narrow the differential in interest rates in India vis-a-vis global interest rates which are still at historic lows.

On Wednesday, the RBI reduced key lending rates by 25 basis points and said that it was expecting inflation to soften in the coming fiscal. However, it also expressed concerns over the postponement of fiscal consolidation target by a year. IANS