5 BPS Cut In Repo Rate Inspiring; More Cuts Needed To Spur Demand And Industrial Growth: PHD Chamber

While welcoming 25 basis points cut in repo rate by the Reserve Bank of India, President, PHD Chamber, Dr. Mahesh Gupta, said, “the move would stimulate demand, augment buying of consumer durables’ vis-a-vis reduced costs of credit, boost investments and growth of manufacturing sector”.

However, the move should continue in the coming times also and repo rate should not be more than 6%, said Dr. Gupta.

RBI in its first Bi-monthly Monetary Policy Statement, 2016-17 has reduced the policy repo rate to 6.5%, CRR unchanged at 4%, reverse repo rate under the LAF at 6%, marginal standing facility (MSF) rate and the bank rate at 7%.

Keeping in view the WPI inflation in negative trajectory (around (-) 0.9% in February 2016  and CPI inflation in the comfortable zone (about 5.1% in February 2016), it becomes inevitable that interest rate environment is in sync with declining inflationary scenario, added Dr. Gupta.

Time is most opportune to strengthen the sentiments of industry and facilitated to grow in double digits in the coming times. Refuelling demand scenario would strengthen industrial growth trajectory and create jobs for millions of young work force, said Dr. Gupta.  

In order to attain the fruitful outcome of the repo rate cut, there should be transmission by the banks of the front loaded repo rate cut to the lending rates said Dr. Gupta.  

 Repo rate must not be more than 6% to induce demand and refuel industry growth at this juncture. Therefore, an aggressive move to cut repo rate is needed at this juncture to facilitate industrial growth, added Dr. Gupta.

Going ahead, Continuation of rate cut would be critical to help demand to remain intact and sentiment for investments to strengthen and grow, said Dr. Gupta.