The Indian industry says that the reduction in the policy interest rate i.e. 0.25 percent from the Reserve Bank of India has prepared a pitch for further reduction in interest rate in the coming time. Industry bodies believe that after the previous rate reduction in May 2020, the RBI cuts 25 basis points (0.25%) to 6.25 percent is likely to relax the interest rates in the near future. According to PTI news, the last amendment in the rates was in February 2023. The repo rate was then increased by 25 basis points to 6.5 percent.
Hope to promote domestic demand
According to the news, CII Director General Chandrajit Banerjee said that this balanced approach by RBI reflects careful balance between promoting economic development and maintaining financial stability. Domestic demand is expected to be promoted as a complement to increase consumption in the Union Budget 2025-26 due to the cut in the policy rate i.e. repo rate. He said that we believe that the reduction in the trend of inflation and the non-hypocritical fiscal policy has given the RBI an opportunity to continue its rate cut cycle and implement a large rate cut when the financial position is favorable.
The economy will get very important support
FICCI President Harshvardhan Aggarwal welcomed the decision of RBI to cut the repo rate by 25 basis points and said that this step would support the economy very important at this turn. He described the decision of the RBI to relax the policy rate as a timely and visionary step and hoped that the banking sector would follow this signal and see a decrease in debt rates. Aggarwal said that in addition, while the RBI maintains a neutral stance in relation to monetary policy, the signal towards more flexible interpretation of inflation targeting prepares the platform for further cuts in the near future.
A strong foundation for investment-based development
The budget has laid a strong foundation for investment-based development, emphasizing manufacturing, MSME (micro, small and medium enterprises) and infrastructure. The Chairman of FICCI said that rate cuts complement these measures, which gives more support to India’s development approach. PHDCCI President Hemant Jain said that reduction in repo rate will increase investment, increase in consumer spending, increase production and overall economic growth.
Latest business news