India Inc Thursday cheered RBI's move to slash key interest rate by 25 basis points and hoped it would encourage banks to lower lending rates, thereby stimulating consumption and investment demand to boost economic growth.
"The 25 bps reduction in repo rate taken together with the shift in RBI's stance from 'calibrated tightening' to a 'neutral approach', would go a long way in lifting sentiment among businesses," CII President Rakesh Bharti Mittal said.
He said the rate cut is in the right direction, given that the inflation footprint has been benign for some time.
"The resumption of rate easing cycle, which is anticipated to bring down banks' lending rates, will provide a fillip to both consumption and investment demand," Mittal said.
In the sixth bi-monthly monetary policy review Thursday, RBI surprisingly reduced the repo rate by 0.25 percent to 6.25 percent.
It also changed the policy stance to 'neutral' from the earlier 'calibrated tightening', signalling further softening on its approach to rates.
The central bank also cut its estimates on headline inflation, which cooled off to an 18-month low of 2.2 per cent in December, for the next year.
It expects the inflation numbers to print in at 2.8 per cent in the March quarter, 3.2-3.4 per cent in first half of the next fiscal and 3.9 per cent in the third quarter of 2019-20.
As per Ficci, which had hoped for a larger cut in repo rate, the 25 bps reduction will be followed up with more such measures in the subsequent months.
Ficci President Sandip Somany said the monetary policy should complement the fiscal policy and strengthen the growth impulses slowly building in the economy.
"This is important as we do not foresee much impetus coming from external sources of growth as the global economy continues to show signs of moderation. In such a scenario, all levers must be used to strengthen India's domestic economy through greater consumption demand and investments," Somany said.
First Published: IST