The latest decision by the Reserve Bank of India (RBI) to cut the repo rate by 25 base points (bps) will create greater investment opportunities for developers in the power sector, according to the industry.
“Considering there is a high degree of stressed assets in the country, the cut by 25bps will act as a fillip and can prompt the banks and lenders to make funds available to the industry especially infra and power at a lower rate,” said Nidhi Narang Chief Financial Officer at Hindustan Power.
She added the development can lead to kick-starting the investment cycle in the core sectors of the economy. The rate cut – from 6.5 per cent to 6.25 per cent – is the first announced by the central bank in six months and is part of new RBI Governor Urjit Patel’s first Monetary Policy review.
“It’s clear that India is determined to maintain a 1.5 to 2 per cent real rate of interest. This will satisfy the urgent need for growth and also encourage savings, said Pratik Agarwal, Chief Executive at Sterlite Power.
The RBI and the government have set a retail inflation target of four percent for the next five years with an upper tolerance level of six percent and lower limit of two percent.
According to Eon Electric Chairman and Managing Director V P Mahendru, the cut is Repo Rate will further provide momentum to manufacturing growth which has seen a dip in recent months. “The rate cut will improve market liquidity and thus create additional demand. Investor’s sentiments are also likely to strengthen, considering that the government has already undertaken various other economic reforms such as early implementation of GST to address concerns faced by investors,” he said.
Experts said a benign food inflation was the key reason for the Monetary Policy Committee to unanimously support the rate cut. While the slight 25 bps cut may not please the common man much, it is a positive development for industries. Al Davis Authentic JerseyShare This