RBI rate cut will boost investments: India Inc

Stating that a stage for cheaper lending has been set with the RBI cutting short-term lending rate, India Inc on Tuesday welcomed the move saying it would boost investments in the country.

"The repo rate cut will provide the boost to investment as well as send a strong signal that turning around growth is of pivotal importance," Confederation of Indian Industry Director General Chandrajit Banerjee said.

The cut in repo rate by 50 basis points was much needed given that the GDP growth is moderating, he added.

Expressing similar sentiments, Assocham Secretary General D S Rawat said: "This has set the stage for cheaper lending costs and created an investment climate which could even possibly reverse inflationary pressures."

High interest rates have been discouraging fresh investments and dragged industrial production down for nearly two years now.

The central bank has acted vigorously to reverse the slowdown, he added.

After a gap of three years, RBI slashed short-term lending rate by 0.50 per cent to 8 per cent which will reduce the cost of home, auto and corporate loans.

RBI had raised lending rates 13 times between March 2010 and October 2011 to contain inflation that had been hovering near double-digit.

Hurt

by the move, industry has been asking the central bank to cut rates and spur industrial, specially in the wake of economic growth slowing down considerably during the past few quarters.

Commenting on the rate cut by RBI, Godrej Group Chairman Adi Godrej said: "It is a very good step because high interest rates were having negative impact on the country's GDP.

"The cycle of repo cut has started and we may see more cuts in future."

Expressing similar sentiments, Biocon Ltd Chairman and Managing Director Kiran Mazumdar-Shaw said anything is good that gives a fillip to growth and industry.

She, however, hastened to add: "Keeping in mind the present situation, it (rate cut) is not enough."

Automakers also welcomed the rate cut saying it would help spur demand.

"Auto sector has been under tremendous amount of pressure since one year. It has grown marginally during the period.

Since 85 per cent vehicles of India are financed, any deduction in rate cut will help the sector," General Motors India vice-president P Balendran said.

Fortis Healthcare Executive Chairman Malvinder Singh said the industry was hoping that for more cuts will follow.