‘Key rate cuts will support fiscal stimulus, encourage investment’

Tribune News Service

Ludhiana, October 4

The Reserve Bank of India (RBI) has cut benchmark interest rates for the fifth time to support other fiscal measures announced by the Government of India to boost growth. The RBI has reduced its key lending rate (the repo rate) by 25 basis points to 5.15 per cent, which takes cumulative cuts so far this year to 135 bps, observed Sharad Kumar Saraf, president, Federation of Indian Export Organisations (FIEO).

The RBI has rightly acknowledged the challenges faced by the global economy as both advanced and emerging markets were showing weakening in demand and contracted manufacturing. The WTO has already significantly cut its forecast for the global trade growth to 1.2 per cent for 2019, he added. The challenges in exports would continue and might aggravate with the geo-political situation, he said. Saraf has urged the state government to ensure that various fiscal stimulus announced by the Central Government are put into operation so that the benefit flows down into the industry.

The FIEO chief said reduction in the credit rates would further encourage investment both by the domestic companies as well as by the FDIs since corporate tax rate in India was now amongst the best in the world. He, however, has urged banks to ensure that the cut in the rates by the RBI are adequately reflected in the lending rates of the bank so that private investment may be encouraged and consumer loans might get a push to help various segments of economy.