India Inc cheers RBI's surprise rate cut

Cheering the surprise rate cut by RBI, India Inc on Wednesday said the move sends a positive signal to investors and will help boost growth by lowering the cost of capital.

CII Director General Chandrajit Banerjee said "Coming on the back of a growth-oriented Budget, the unexpected cut in headline interest rate by the RBI sends a huge positive signal that the central bank and the government are working in tandem to provide a robust scaffolding to growth, even while not losing sight of inflation, which has now been made explicit in the objectives of the RBI."

Encouraged by softening inflation and fiscal consolidation roadmap by the government, RBI today slashed key policy (repo) rate by 0.25 per cent to 7.5 per cent, the second such surprise rate cut outside regular policy review in less than two months.

"Coming on the back of reform measures initiated in the Budget, today's rate cut by RBI is a great booster for the economic growth, which seems to be the area of focus for the central bank. "It will surely boost the morale of the consumers as also lower the interest costs of the industry," Assocham President Rana Kapoor said.

The cut in the policy rate by RBI will help in lowering interest rate for individual and corporate borrowers.

It will thus make home, auto and corporate loans cheaper.

However, cash reserve ratio (percentage of deposits kept in government securities) has been left unchanged at 4 per cent.

Inflation measured by the wholesale price index (WPI) was at 0.11 per cent in December.

The data for November was revised downwards to (-)0.17 per cent, from the provisional estimate of zero.

However, food inflation witnessed a rising trend in January and scaled a six month high of eight per cent, according to the government data released on Monday. 

Photograph: Reuters