The RBI’s Monetary Policy Committee today reduced the repo rate by 25 basis points to 6.0 %. Consequently the reverse repo rate is reduced to 5.75 %. The reduction in the repo rate is much on expected lines. However AIAI feels that RBI should have reduced the rate by an additional 50 basis points on the back of lower inflation and well-distributed monsoon. The weakened industrial performance with loss of speed in manufacturing in the last quarter urgently need policy intervention and support to provide relief to manufacturing and MSMEs.
Mr. Vijay Kalantri, President, All India Association of Industries said, “In Our view, RBI should have reduced the repo rate by an additional 50 basis points to provide boost to economic growth. RBI’s acknowledgement on weakness in capex cycle, corporate India’s struggle to implement stalled projects and falling manufacturing PMI presents a strong case for policy support by reducing repo rate to provide impetus to economy and MSME growth.”
Further RBI accepts that high levels of stress on banks and corporates are likely to deter new investments. In this scenario, there is an urgent need to revive private investments, remove infrastructure bottlenecks and provide thrust on housing for all.
Mr. Kalantri added, “RBI must make efforts to promote long term funding for infrastructure sector including power, road and ports. These sectors are relinquishing under the policy delays and decelerating trends. RBI should further create soft guidelines to provide much needed impetus to MSMEs and manufacturing sector. Such guidelines would help to revive these sectors and in return help to generate much needed employment, competitiveness and will revive dwindling exports.”