PHD Chamber expects significant cut in repo rate in the coming quarters to boost demand and investments

The PHD Chambers appreciated the RBI's concerns on maintaining balance between growth and inflation dynamics in the Sixth Bi-monthly Monetary Policy Statement, 2019-20. Going ahead, there must be a significant cut in policy repo rate to the level of 4.5% in the coming quarters to boost domestic demand, provide a fillip to investments and revive economic growth, said Dr D K Aggarwal, President, PHD Chamber of Commerce and Industry. RBI in its Sixth Bi-monthly Monetary Policy Statement, 2019-20 has kept the repo rate unchanged at 5.15%, reverse repo rate under the LAF at 4.90%, marginal standing facility (MSF) rate and the Bank Rate at 5.40%.

 

At this juncture, full transmission of the earlier cuts in repo rate with an effective reduction in lending rates by the banking sector would be crucial to percolate the benefits at the ground level with reduced cost of capital, said Dr Aggarwal. The GDP growth is expected to revive in the coming quarters due to anticipated recovery in private consumption, particularly in rural areas, easing of global trade uncertainties and the rationalisation of personal income tax rates in the Union Budget 2020-21, along with measures to boost rural and infrastructure spending, encourage exports and spur investment activity, said Dr Aggarwal.

Though CPI inflation has been elevated in the recent times amid rise in the food prices, however, inflationary conditions are expected to ease in the coming quarters which will create policy space for future action, said Dr Aggarwal. We appreciate that the RBI has decided to continue with the accommodative stance, given the evolving growth-inflation dynamics in the country, said Dr Aggarwal. We expect reduction in repo rate to the level of 4.5% in the coming quarters to support the liquidity in the economy, enhance the sentiments of businesses with reduced costs of capital and easier access of credit to the MSMEs, said Dr D K Aggarwal.

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