RBI rate cut to boost investor sentiment: India Inc

Confederation of Indian Industry director general Chandrajit Banerjee said that the reduction in repo rate has come as a positive surprise in the new year and would be a huge mood lifter for investors who have been grappling with subdued demand conditions.

Enthused by the 25 bps rate cut by the RBI, India Inc on Thursday said the move will boost investor sentiment and revive growth, even as it hoped the central bank will further bring down interest rates to lower the cost of capital for the industry.

"This measure will help in improving the investor sentiment. FICCI hopes that this will be the beginning of further cuts in the policy rate by the Central Bank, and will enable its transmission into lower lending rates by the Banks" said Ficci President Jyotsna Suri.

Confederation of Indian Industry director general Chandrajit Banerjee said that the reduction in repo rate has come as a positive surprise in the new year and would be a huge mood lifter for investors who have been grappling with subdued demand conditions.

Encouraged by softening inflation, the RBI on Thursday decided to cut the benchmark interest rate by 0.25 per cent to 7.75 per cent with a view to boost growth.

"Even though symbolic, it would send a strong signal down the line that both the government and the RBI are acting in concert to harness demand and take the economy to a higher orbit of growth".

"A rate cut would propel investment demand, spur spending in rate sensitive consumer durables and give a fillip to construction activity," Banerjee said.

The decision to reduce repo rate comes a fortnight ahead of the scheduled date of monetary policy announcement on February 3.

"Going forward, CII hopes that while maintaining a delicate balance between growth and inflation, the RBI would shift its stance in favour of growth, given that the trend in inflation is clearly subdued.

“CII would call for a further cut in policy rates by at least 25 basis points in the forthcoming monetary policy," added Banerjee.

"The move is in line with industry expectations and would help to revive growth and encourage investment, “Assocham President Rana Kapoor said.

"Repo rate cut by Reserve Bank of India is inspiring and would lead to re-capture industrial activity which is impacted by multiple factors and high borrowing cost is one of them," PHD Chamber president Alok Shriram said.

The RBI has been keeping the benchmark interest rate at a level at 8 per cent since January 2014.