Tuesday, Aug 11 2020 | Time 00:09 Hrs(IST)
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Business Economy


Pause in softening interest rate cycle to allow more transmission is sensible: India Inc

New Delhi, Dec 5 (UNI) Assocham president Mr B K Goenka on Thursday said a temporary pause by the Reserve Bank of India to the policy interest rate reduction cycle while keeping its stance accommodative is understandable as long as it keeps nudging the banks to significantly pass the benefits of earlier rate combined Repo rate cuts of 135 basis points since February this year.
Commenting on the RBI's Monetary Policy Committee's decision to keep the Repo rate unchanged at 5.15 per cent, Mr Goenka said by the central bank's own assessment against rate cuts of 135 basis points in the last 10 months, the transmission by the banks has been only 44 basis points. ''We agree with RBI Governor Mr Shaktikanta Das that there is no point announcing rate cuts mechanically, unless the actual transmission takes place at the ground level.''
The Associated Chambers of Commerce and Industry of India president said that with the growth projections by the RBI being substantially lowered to 5 per cent for FY 20 and the second quarter GDP expanding by 4.5 per cent, the economy needs a major demand push which can be greatly generated by much higher credit growth which remains dismal. " While inflation control remains the mandate of the RBI, balancing the target with growth is equally important and the tone and tenor of RBI Governor's statement and subsequent media interaction points towards this end. Besides, a coordinated approach with the government to prime up the GDP growth, as underscored by Mr Das , is equally appreciable.''
In a statement here, Mr Goenka said the focus should primarily be directed towards demand revival . While the government does seem to be doing the heavy lifting, revival of consumer confidence would do the trick. "Sectors like real estate and construction can really lift the sentiment , making it imperative for the Stress Fund of Rs 25,000 crore to be made functional for the sector. Besides, improved outlook in agriculture should also help the economy bottom out faster''.
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