Corporates and industry associations have welcomed the Reserve Bank of India’s (RBI) move to reduce the repo rate by 25 basis points and the cash reserve ratio (CRR) by another 25 basis points. Adi Godrej, President, CII and chairman of Godrej Group, said that the rate cut indicated that the RBI was ready to promote growth in addition to anchoring inflationary expectations. “In terms of quantum, the industry would have appreciated a higher repo rate cut, but under the present circumstances the 25 basis points lowering of repo rate does send the correct signal,” Mr Godrej said.

Pawan Goenka, President Automotive & Farm Equipment Sectors, Mahindra & Mahindra, said,

“Today’s combo of a repo as well as CRR cut is a welcome announcement, and, hopefully, will help revive investments in the core sectors”.

“RBI’s rate cut is an encouraging move at a time when high interest rates were having negative impact on growth,” said Seshagiri Rao, joint managing director & Group CFO- JSW Steel.

“This will hopefully help in reversing the anaemic industrial growth observed over the last year. Release of Rs.18,000 crore, with CRR cut, will help in easing the funds flow situation,” said Naina Lal Kidwai, President, FICCI. Our New Delhi correspondent writes:

Assocham President Rajkumar N. Dhoot hoped the system would truthfully pass on the benefits to the end-users and ensure true economic recovery.

Mr. Dhoot said the RBI had aimed to improve the investment climate and investor sentiments to ensure economic recovery.

Realty sector

The real estate sector, which has been reeling under huge debts and a slowdown in sales, has welcomed the RBI’s decision to cut the cash reserve ratio (CRR) and the repo rates by 25 basis points. “Finally we have a rate cut which, coupled with the lower CRR, should provide great relief to the real estate industry,” Pranab Datta, Chairman, Knight Frank India, a leading real estate consultancy said in a statement. “The consequential drop in home loan rates will greatly benefit consumers and stimulate demand for new housing.”

Developers though, felt that the RBI could have done more. “Though RBI has made a good beginning and we welcome it, it is not enough,” said Lalit Kumar Jain, National President, Confederation of Real Estate Developers’ Associations of India (CREDAI).

The liquidity in the economy is expected to significantly improve on the back of the reduced rates, Shobhit Agarwal, Managing Director – Capital Markets, Jones Lang LaSalle India, a real estate consultancy, said in a statement.

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