India Inc sees rate cut in September 29 policy

India Inc sees rate cut in September 29 policy

India Inc sees rate cut in September 29 policy

 India Inc expects a 25 to 50 bps cut in benchmark interest rates by the Reserve Bank of India (RBI), when the latter reviews the policy on September 29, in the wake of continued downtick in wholesale price inflation for the tenth month in a row.

“The inflation based on the Consumer Price Index (CPI) was also at a record low of 3.66 per cent in August — over two percentage points lower than the RBI’s January 2016 target. At the same time, the growth in several interest sensitive sectors like real estate, construction, automobile, consumer durables and non-durables has been sub-optimal, crying for a build up of a market demand,” according to an Assocham survey report. 
 
Continuing its deflationary trend, which shows how the pricing power with the manufacturers has been curtailed, WPI inflation plunged to a historic low of (-)4.95 per cent in August, though helped by the cheaper global commodity rates.

With the exception of pulses, onion and a few vegetables, prices of other food items have remained benign, reflecting squeezing of the consumer demand that in turn discourages investment in various sectors of the economy.
“Given that CPI inflation has also been declining, RBI needs to reduce interest rates sharply to drive a recovery in demand,” the CII had said recently.

“Under the present circumstances, it would be most appropriate for RBI to give weight to growth considerations and announce a deeper cut in the policy rate. We hope RBI and the banking community will coherently work towards lowering of lending rates,” Ficci said.

“Cut in interest rates is required to act as a demand push at the consumer level while at the same time, to help revive investment cycle, particularly in the private sector. The trouble has been aggravated by a high level of debt in the private sector which makes it onerous for the companies to service the debt. Rather than a small cut, at least a 50 bps reduction in Repo with a clear message to the banks to pass on the same, should be pushed,” according Assocham.   


India Inc looks at 25-50 rate cut
Continued dip in WPI makes an impact
Industry bodies call for lower rates to boost economy

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