Rate cut will spur growth and boost consumption: India Inc

The fifth-rate cut announced by the RBI's monetary policy committee (MPC) will revive investment and encourage consumption, India Inc said on October 4. These reactions followed the anticipated rate cut of 25 basis points (bps) announced by the central bank.

The new benchmark lending rate now stands at 5.15 percent and will be able to kick-start the currently sluggish economy as per the industry reactions.
The industry also emphasised that banks needed to facilitate a faster policy transmission to borrowers.

The RBI's latest move to trim repo rate comes at a time when the economic growth has slowed down. The April-June quarter saw a six-year low GDP of 5 percent. 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 percent.

CII Director General Chandrajit Banerjee said that the cumulative 135 bps 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.

PHD Chamber of Commerce and Industry President D K Aggarwal added that the 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.

Exporters body FIEO's President Sharad Saraf, however, said the challenges in exports will continue and may aggravate with the geopolitical situation.
Muthoot Pappachan Group CMD Thomas John Muthoot said for the common man to get the benefits of these cuts, banks must 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, Middle East & Africa, CBRE.

RBL Bank economist Rajni Thakur told the wire agency that the central bank is reaching its lower bound of policy space and has tried to steer support expectations away from the 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 meeting.

(With inputs from PTI)