oppn parties RBI Cuts Rate, Changes Stance To Accommodative

News Snippets

  • India becomes the first country in the world to make flashing of anti-tobacco warning on shows on OTT platforms
  • BJP says that by targeting PM Modi on his visits abroad, Rahul Gandhi is denting India's image
  • Nepalese Prime Minister PK Dahal Prachanda arrived in India on a 4-day official visit in whihc border issues and several others contentious issues will be discussed
  • Even as Home minister Amit Shah tours Manipur and holds peace talks, violence continues in the state after a lull of one day
  • PM Modi says that boycott of Parliament inauguration by some opposition parties was an insult to the nation
  • Allahabad HC upholds Varanasi district judge's order that petition for worshipping Shringar Gauri in Gyanvapi mosque is maintainable and can be heard
  • Rahul Gandhi says if PM Modi were to meet God, he is such a 'specimen' and know-all that he would start explaining to God how the universe functions
  • Deloitte raises flags in Adani Ports' dealing with three entities regarding disclosure of facts
  • Centre meets the fiscal target of 6.4% in FY23
  • Data released by NSO shows India's GDP grew at 6.1% in Q4 and 7.2% in the full year in FY23
  • IOC takes cognizance of police action on wrestlers, asks IOA to protect athletes
  • World Rapid Chess champion Magnus Carlsen says India is doing a lot of right things and will soon emerge as a powerhouse nation in chess with scores of talented youngsters
  • Thai Open badminton: PV Sindhu & K Srikanth ousted, but Kiran George stuns third seed Shi Yu Qi 21-18, 22-20
  • The lone Congress MLA in West Bengal, Bayron Biswas from Sagardihi, who won in a byelection recently, joins Trinamool, Congress says such 'poaching' not good for opposition unity
  • PM Modi says every move of his government is guided by the wish to improve the lives of the people
Excellent GDP growth: Q4 at 6.1% and FY23 at 7.2%, beats all estimates
oppn parties
RBI Cuts Rate, Changes Stance To Accommodative

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Sunil Garodia By our team of in-house writers.

Benign inflation, slowing economy and the return of NDA (that assures continuity in policy and the hope of a renewed sense of fiscal responsibility on the part of the government) has allowed the RBI to change its policy stance from neutral to accommodative and reduce the key repo rate by 25 basis points to 5.75 percent, the lowest since September 2010. The change in stance also means that further rate cuts are in the offing.

Although the markets were not enthused by the rate cut (the Sensex crashed by 554 points after the announcement) there are many positives in the RBI decision. All economic indicators are signaling a slowdown with demand for goods and services not picking up. Some sectors are showing negative growth. Although it is true that projects are not dependent only on the interest rates (promoters factor in the cost of acquiring capital in their overall project costs and go for the project if they can sell the products after acquiring capital at current interest rates), it is also true that some projects that seemed unviable at high interest rates may become viable at lower costs. Lower interest rates on retail loans may also spur the demand for goods thereby giving a boost to the manufacturing sector.

The economy needs a push and making capital available at a lower cost is one of the ways to encourage entrepreneurs to expand capacity or go for new projects. The RBI has made it known that it will prod the banks to pass on the benefit to customers. If there is a renewed demand for products due to cheaper loans which in turn encourages entrepreneurs to expand or install new projects then the economy will come out of the morass it seems to be sliding in. But the government will have to play its part by keeping a tight control on fiscal deficit and making investments in infrastructure.