The Confederation of India Industries (CII) on Tuesday welcomed the Reserve Bank of India's (RBI) decision to cut the Repo Rate by 25 basis points, saying that the move reinforces the perception that the Central bank and the government are working to take the economy to a higher pedestal of growth.
CII Director General Chandrajit Banerjee, however, said that expectations were to reduce the rates by at least 50 bps.
"We at CII strongly feel that the accommodative monetary policy stance should be maintained to boost consumption demand and trigger the investment cycle. Many stalled projects, which are waiting for availability of credit at cost effective rates, would find it viable to restart operations if the RBI continues with its rate easing cycle," Banerjee said in a statement issued by CII.
"A reduction in interest rates would also provide a fillip to automobiles and the capital goods sector which are experiencing a gradual recovery. The rate cut would facilitate corporate investments in the infrastructure space including construction as well as spur spending in rate sensitive consumer durables," he added.
Banerjee further praised the government for containing the fiscal deficit and undertaking reforms to take the economy on a positive growth track.
"At a time when the government has contained the fiscal deficit at 4.0 percent of GDP during 2014-15, beating its own financial target of 4.1 percent, and undertaken path-breaking reforms to take the economy on a positive growth track, it is important that the monetary levers also work in tandem to support the growth crusade especially as inflation is very much under control. We also hope that the banks would transmit the rate cut onwards so that credit off take in the economy improves," he said.
The RBI earlier in the day announced a cut in Repo Rate by 25 basis points to 7.25 percent from 7.5 percent in the monetary policy review while keeping the Cash Reserve Ratio (CRR) unchanged at four percent.