Expect RBI to cut key interest rate when inflation stabilises: India Inc

New Delhi: India Inc welcomed the Reserve Bank's move to raise the growth outlook for FY25 and stated that it expects the Reserve Bank to reduce the key repo rate when inflation stabilises within its target band.

The Reserve Bank, which has been mandated to ensure inflation remains at 4 per cent (with a margin of 2 per cent on either side), mainly factors in CPI while arriving at its monetary policy.

It left the key interest rate unchanged as widely expected, keeping the focus on inflation amid robust economic growth that is likely to provide the new Modi government headroom for manoeuvring reforms.

The central bank also retained its projection for retail inflation at 4.5 per cent for the current fiscal assuming a normal monsoon, while emphasising that uncertainties related to food price outlook warrant a close monitoring.

Consumer Price Index (CPI)-based retail inflation has been projected at 4.5 per cent with quarter-wise projections at 4.9 per cent in Q1 (April-June), 3.8 per cent in Q2, 4.6 per cent in Q3, and 4.5 per cent in Q4.

Ficci President Anish Shah said, "We are encouraged by RBI's outlook on growth in FY25, which has been revised upwards from 7 per cent to 7.2 per cent. The forecast for inflation for FY25 has been maintained at 4.5 per cent. This is positive and reflects RBI's stellar actions in pro-actively addressing risks, thus keeping the economy on a strong momentum".

Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry, said, "We are expecting inflation trajectory to stabilise within the target band of RBI and thereafter softening of the policy stance of the monetary policy." RBI's unwavering focus on price stability for a sustainable economic growth would further cement foundation for a long and robust run for the Indian economy, Assocham Secretary General Deepak Sood said, reacting to the decision of the Monetary Policy Committee to keep the policy REPO rate unchanged at 6.50 per cent.

"While the policy stance of the RBI-MPC is on the expected lines, the GDP forecasts of 7.2 per cent for the FY2024-25 along with its resolve to further moderate inflation are reassuring macro indications which can be leveraged for India remaining in the top league of economic growth amongst the major economies,'' Sood said.

Rajiv Agarwal, MD & CEO, Essar Ports said the RBI's decision to keep the repo rate steady at 6.5 per cent was expected in view of maintaining economic stability.

"The GDP growth forecast of 7.2 per cent for FY25 is a testament to the resilience and growth potential of our economy. For the ports and infrastructure sector, this stability in lending rates is welcome. The RBI's policy provides a good foundation for the country to enhance investments and contain inflation," he added.

Samir Jasuja, CEO and MD of PropEquity said with overall inflation falling within the RBI range, a policy rate cut may not be very far away.

"Real estate prices have gone up substantially and a future rate cut will give much higher purchasing power to the customer which is the need of the hour. Such a move would be a welcome news for home-buyers across cities including metro cities as well as tier II and III cities," he added.

HS Bhatia, Managing Director of DAEWOO India said.

"The steady repo rate ensures borrowing costs remain consistent for consumers and manufacturers, offering stability for planning and investment. This reliability, coupled with the RBI's dedication to maintaining inflation at 4 per cent, provides a solid framework for the consumer durable sector's development. As the economy rebounds, the sector is poised for positive growth prospects".

Rohit Arora, CEO and Co-founder, BizCredit and Biz2X, said, "The ongoing developments in the digital payment landscape and the supportive monetary policies continue to foster a conducive environment for businesses and investors alike." The Monetary Policy Committee, consisting of three RBI and an equal number of external members, kept the repo rate unchanged at 6.50 per cent for an eighth straight policy meeting and stuck to its relatively hawkish stance of "withdrawal of accommodation", Governor Shaktikanta Das said in his statement.

However, there were signs of a more divided policy committee, with one additional member voting for a softening in stance as well as policy direction. Two external members, Ashima Goyal and Jayanth Varma, voted for a cut, compared to one in the previous meeting.

The decision comes just days ahead of Narendra Modi assuming the office of the Prime Minister of India for the third straight time but with a smaller-than-expected election victory that forced his party BJP to share power in a coalition government.