CHENNAI: Government ministries and officials reacted positively to the rate cut with the Finance Ministry pointing out that the move would inject liquidity in the system and help achieve closer to 8 per cent growth in the current fiscal.
Finance Secretary Ashok Lavasa stated that the RBI and the government are on the same page with regard to inflation target and the government is taking all measures possible to keep inflation within the range of 2-6 per cent.
“The RBI policy will boost liquidity in the system... On the whole, this is a decision which will go down well with all sections of the economy,” he said. The government has notified an inflation target of 4 per cent, with an upper and lower tolerance band of 2 per cent. On the impact of the Pay Commission on inflation, Lavasa pointed out that while it might increase some prices, domestic consumption will also grow.
NITI Aayog Vice-Chairman Arvind Panagariya meanwhile, weighed in with a tweet saying that it was a welcome move. “The positive and optimistic narrative by it will help boost investor confidence,” he tweeted.
Economic Affairs Secretary Shaktikanta Das also hailed the move, but brought up the low rate of transmission of rate cut by banks. “... expect Banks to follow it up with effective transmission of rates. Rate cut net positive for economy,” Das tweeted. Adding that the rate cut will facilitate the move towards a low cost economy.
Lavasa meanwhile also stated that passing on the interest rate cut benefit to the consumer will depend on the banks. “It depends on the banks. Banks take their own decision based on market sentiment.” However, Lavasa added that the RBI deserved to be complemented as it has maintained the liquidity in the market well.