RBI`s jumbo rate cut a boost for capex and consumption: Industry chambers
Leading industry chambers on Friday lauded the RBI’s rate cut decision, describing the continuation in the accommodative policy stance as a catalyst for boosting capex and demand across different sectors of the economy.
Assocham expressed delight at the 50-basis-point reduction in the policy interest rates.
"The MPC's repo rate cut of 50 basis points and cash reserve ratio cut of 100 bps is expected to reduce lending rates, spur growth in the economy and encourage borrowing from industry for capex," said Assocham President Sanjay Nayar.
It will also induce business growth through enhanced credit, especially in interest rate-sensitive sectors such as real estate, automobiles, infrastructure, exports, and the MSME segment.
Sharing the RBI's pro-growth impulse on India’s economic growth, Assocham Secretary General Manish Singhal said that a rate cut will lower borrowing costs for consumers and corporates, stimulate credit demand and revive consumption.
“The rate cut will also benefit the agricultural sector as lower rates can reduce borrowing costs for farmers and agri-businesses, especially in the pre-sowing season. In addition to this, improved rural demand could support rural consumption if passed on effectively through rural credit channels,” he mentioned.
On the global stage, other central banks signal neutral or slightly accommodative stances in 2025 as inflation moderates globally.
This will give the RBI more flexibility to reduce rates without risking a sharp capital outflow, said trade chambers.
According to PHDCCI President Hemant Jain, the RBI MPC decision will support India’s growth amid continued global volatilities.
"The MPC’s decision to change the monetary policy stance from accommodative to neutral, driven by softening inflation, resilient growth prospects in the near and medium term, strong domestic demand and merchandise exports," he said.
Real GDP growth for FY 2025-26 is projected at 6.5 per cent, supported by private consumption, fixed capital formation, strong rural and urban demand, and bright agricultural prospects due to an above-normal southwest monsoon forecast.
"Going forward, India will continue to grow resiliently and robustly, supported by strong macroeconomic fundamentals and price, financial and political stability. Geopolitical tensions and global trade uncertainties pose downside risks," Jain noted.
The global environment is broadly supportive of India’s rate cut cycle due to low inflation abroad, manageable oil prices and accommodative peers add to the RBI’s comfort.
"However, RBI would remain vigilant about global uncertainties such as trade disruptions, oil price volatility, weather anomalies, among others," added Assocham.
