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India’s industry captains on Tuesday were dismayed at the quarter point cut in the repo rate by the Reserve Bank of India (RBI), a move welcomed by the Modi government.
Industry representatives felt the rate cut was “too little, too late” saying they had expected a deeper cut by 50 basis points (BPS) to induce demand, re-fuel industrial growth, and kick-start the investment cycle. Chief Economic Adviser (CEA) to the Modi government Arvind Subramanian said the rate cut showed the economy was still in need of “policy support” as it recovered, and welcomed the move.
“Given the current situation, the central bank could have considered a deeper cut in repo rate by 50 BPS. As RBI’s own prognosis shows, industrial growth has been recovering, albeit unevenly,” Federation of Indian Chambers of Commerce and Industry (FICCI) President Jyotsna Suri said.
Assocham President Rana Kapoor also said at least 50 BPS cut in the repo rate was required, along with a reduction in the cash reserve ratio (CRR), so that banks are able to reduce their cost of funds.
“These cuts are consistent with the trends in the economy including strongly declining inflation, contained current account deficit, and ongoing strong fiscal discipline,” Subramanian told reporters.
PHD Chamber President Alok B Shriram said there must be an aggressive move to cut repo rate as demand scenario and industrial growth are in severe slowdown.
CII Director General Chandrajit Banerjee said while the industry expected a reduction by at least 50 BPS, it still reinforced the perception that the government and the RBI were working to take the economy to a higher pedestal of growth.