NEW DELHI: India Inc is optimistic — at the core of the feeling is the expectation that the interest rate cut will be passed on by banks to the borrower, providing the necessary impetus to interest sensitive sectors such as consumer durables, automobiles and housing.
“At the anvil of the busy credit season when the demand for bank credit is anticipated to go up, the RBI intervention to reduce interest rates and other welcome liquidity supporting measures would enable banks to transmit the cut to borrowers and thereby support the growth cycle,” CII Director General Chandrajit Banerjee said.
While the Federation of Indian Chambers of Commerce and Industry (FICCI) president Harshvardhan Neotia said that cost of capital needs to be more competitive. “Also, a moderate interest rate regime will lead to an uptick in interest sensitive sectors such as consumer durables, automobiles and housing,” he said.
Industry believes that the rate cut will boost sentiment and help push growth in the infrastructure, construction and manufacturing sectors.
“The industry expects a lot of value addition from the MPC and possibly another rate cut before March 2017, while expecting real transmission of the lower rates by the banks,” Associated Chambers of Commerce (Assocham) Secretary General D S Rawat said.
President of the Indian Merchants Chamber Deepak Premnarayen pointed out that the speed of transmission of this rate cut would be an important determinant. At the anvil of the busy credit season, when the demand for bank credit is anticipated to go up, the RBI’s intervention to reduce interest rates and other welcome liquidity supporting measures would enable banks to transmit the cut to borrowers and support the growth cycle.
“It’s clear that India is determined to maintain a 1.5-2 per cent real rate of interest. This will satisfy the urgent need for growth and also encourage savings at the same time,” said Sterlite Power CEO Pratik Agarwal.
ASSOCHAM added that it was heartening to see the industry’s continued accommodative stance being supported by the entire Monetary Policy Committee.