Corporate India smiled on Monday after the Reserve Bank cut its signal short-term rate, saying demand and investment will perk up to rejuvenate a sagging economy. But for now, it is all about sentiment. Though bankers have not spoken of cuts, loan-driven auto makers hoped that a kind cut would come in time for Diwali sales.
Chandrajit Banerjee, director-general, Confederation of Indian Industry, said the central bank’s decision was much required for growth in the wake of a severe credit crisis.
“The step will help new and existing investment plans to be on track,” he said.
Ficci said the move would serve as a confidence booster for the financial as well as the real sector. “As the inflation rate seems to be now softening to some extent, it is right time to shift focus to the growth that in the recent past has taken a severe hit,” Ficci said.
The time is just right for car makers who had run out of tricks to win customers.
“The two biggest concerns for us in the recent past have been liquidity crunch and high interest rates. The CRR (cash reserve ratio) cut takes care of the former while today’s repo rate cut should have an impact on interest rates,” said Pawan Goenka, President for automotives at Mahindra & Mahindra.
“We welcome the reduction in repo rate and measures like these will improve customer sentiment and bring back buoyancy in demand,” said Ajay Seth, chief financial officer at Maruti Suzuki.