FICCI recommends RBI to 'find space for rate cut'

Post the Reserve Bank of India's (RBI) bi-monthly monetary policy statement, the Federation of Indian Chambers of Commerce and Industry (FICCI) has said the former must find space for a rate cut in the coming quarters.

The statement comes after the RBI's six-member monetary policy committee (MPC) announced that the repo rate and reverse repo rate would remain unchanged.

To this, FICCI President Rashesh Shah suggested that a rate cut be facilitated in the coming quarters to spur demand and investments.

"It is encouraging to note that the RBI has lowered inflation forecasts and raised growth projections for 2018-19 as projected by FICCI. While it has maintained status quo in current monetary policy statement, we hope that RBI will soon consider cut in policy rate and give a further boost to demand and investments. Although the economy is seeing signs of recovery, support is needed from all quarters to translate this into a firm recovery. This is critical for pushing investments, growth and job creation," he said.

Furthermore, Shah noted that even though the RBI has maintained a status quo on the policy rates, inflation and growth projections for 2018-19 provide optimism for a rate cut in the forthcoming monetary policy decisions.

"FICCI hopes that going forward, the RBI will adopt an accommodative stance and thereby give a boost to demand and investments. This is critical for transcending to higher growth trajectory as well as to create more job and work opportunities. Additionally, as the recapitalisation process of public sector banks gains traction and measures aimed at addressing NPAs materialise, we believe that there will be effective transmission of lending rates and greater room for lowering of lending rates by the banks," he added.

On a related note, the RBI kept the repo rate and reverse repo rate unchanged at 6 percent and 5.75 percent respectively.

The central bank in its bi-monthly monetary policy statement noted that the real Gross Domestic Product (GDP) growth in FY19 would be 7.4 percent as against 6.6 percent in FY18. It also estimated that real GDP growth in FY20 would range from 7.4 to 7.9 percent.