Industry welcomes CRR cut, anticipates rate cut to follow
Dec 06, 2024
New Delhi [India], December 6 : Industry bodies welcomed the overall RBI monetary policy announcements made on Friday.
Commenting on monetary policy, Harsha Vardhan Agarwal, President, FICCI said while the Reserve Bank of India's stance on the repo rate was widely expected, the industry body welcomes the 50-bps cut in the Cash Reserve Ratio (CRR) rate.
"This move is well-timed and practical and should help ease out the liquidity situation supporting credit and overall growth."
"On the inflation front, the prices are expected to moderate in the latter part of the current fiscal year. We look forward to a cut in repo rate in the next policy statement," added Agarwal.
Food prices have been driving the current spurt in prices and a seasonal correction is on anvil.
"It is pertinent to ensure a seamless supply-side framework through better planning, logistics and distribution management of food items leveraging careful monitoring of production data," Agarwal of FICCI said.
Chandrajit Banerjee, Director General of the Confederation of Indian Industry (CII), also welcomed the 50-bps cut in the cash reserve ratio, asserting that it will help ensure the availability of additional resources for all productive sectors of the economy, especially in anticipation of a near-term tightening of systemic liquidity.
"This was a specific CII ask along with a request for moderation in headline interest rates," Banerjee added.
"However, we draw satisfaction from the overall statement that the neutral stance has been maintained and with the anticipated easing of inflation, we can expect rate cuts in the foreseeable future."
With these measures, CII anticipates that there will be a better balance between growth and inflation management.
The Reserve Bank of India (RBI) decided to keep the repo rate unchanged at 6.5 per cent for the 11th consecutive time, marking a continuation of its neutral monetary policy stance. The RBI downwardly revised GDP forecast for 2024-25 to 6.6 per cent from 7.2 per cent earlier.
The RBI Governor announced that the CRR has been cut by 50 basis points from 4.5 per cent to 4 per cent. This the Governor had said will infuse Rs 1.15 lac crore of liquidity into the banking system.
Further, the retail inflation projection for 2024-25 has been hiked from 4.5 per cent to 4.8 per cent.
