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RBI may cut repo rate in policy: CEO survey

business Updated: Jan 28, 2008 17:00 IST

Reuters
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The Reserve Bank of India (RBI) may cut a key interest rate by 25 to 50 basis points to help the economy weather a possible global slowdown and boost domestic demand, a survey said on Monday.

The survey on 285 chief executives by Associated Chambers of Commerce and Industry (ASSOCHAM) said as many as 84 per cent of respondents hoped for a cut in the repo rate by the Reserve Bank of India in its policy review due on Tuesday.

The RBI last cut the repo rate, its lending rate to banks, in March 2004. It raised the rate five times between June 2006 and last March, then kept it on hold for 10 months as it monitored inflation, high money supply and credit growth.

"Recessionary forces shaping up in the global economy, slowdown in manufacturing and construction at domestic level and increasing prospects of copious capital inflows have set the stage for the RBI to cut the rates," ASSOCHAM said.

"Interest rates have reached their peak and are in fact hurting the industrial growth."

The Indian economy would require policy support to retain the 8.6 per cent average growth of the past four years, the CEOs said.

Last week, another industry body, the Federation of Indian Chambers of Commerce, urged the central bank to cut repo rate by 25 basis points. A Reuters poll showed that seven out of 13 economists expect cut in repo rate in the policy review.