Finance Minister Arun Jaitley on Thursday hailed the Reserve Bank of India's decision to cut down repo rate by 25 basis points, saying it is a positive move for the Indian economy and will certainly help in reviving the investment cycle.
"It is positive for the Indian economy and it will certainly help in reviving the investment cycle that the government seeks to restore," Jaitley said.
"The reduction in the rates is a positive development. It will lead to more money in the hands of the consumer, greater spending," he added.
Minister of State for Finance Jayant Sinha on his part said that the quarter-point rate cut would mark an 'inflection point' after a period of high interest rates.
"I think it is a strong indication that the economic cycle has dramatically turned and this is inflection point and that what we are towards which is dramatic and accelerating growth is starting to emerge," he said.
Sinha further said the RBI's decision was driven by declines in both actual and expected inflation, and not by concerns about India's economic recovery losing traction.
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"Obviously, it is going to be dependent on the data and the actions of various economic actors and policy leadership that we will continue to demonstrate. So, we will have to wait and watch but the facts that rate cuts have happened at this time when economic momentum is picking up and the disinflationary pressures are as strong as they are," he added.
The Ministry of Finance has stated that the RBI's move is a significant one in signalling a shift in stance and direction for policy going forward.
The Ministry of Finance stated that this progress will provide a boost to the economy directly by increasing the private sector's ability and willingness to spend. It should also help indirectly by improving balance sheet of the Corporate Sector and banks, facilitating an increase in the demand for and supply of credit.
The Ministry of Finance also said that along with other policy actions already taken by the government and other that are under its consideration, this move represents one more step towards reviving investment and realizing India's medium term growth potential.
Meanwhile, Sunil Saha, a stock market expert, said the RBI's decision is a welcome move.
"This is just ahead of RBI meet which is scheduled to have taken place in the first week of February and the reason is simple that we have seen household is coming down substantially. The long term outlook for inflation looks quite rosy," he said.
The RBI has announced this rate cut ahead of its next monetary policy on February 3. This cut in repo rate is likely to reduce interests on various loans.
The repo rate is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds.
The RBI's move comes after the Wholesale Price Index (WPI)-based inflation moved up marginally in December to 0.11 percent from zero level in November, reversing the six month declining trend.
This is in contrast to the WPI inflation in December 2013, which stood at 6.40 percent.