The Reserve Bank of India (RBI) is anticipated to reduce the benchmark policy repo rate, which currently stands at 6.50%, by at least 50 basis points in an effort to stimulate economic growth, according to a statement from the Associated Chambers of Commerce and Industry of India (ASSOCHAM) on Thursday.
In response to the economic crisis triggered by the Covid-19 pandemic, the RBI last lowered the repo rate by 40 basis points, bringing it down to 4% in May 2020. Since then, the central bank has maintained a cautious stance, balancing inflation control with economic growth.
Following consultations with key stakeholders, ASSOCHAM has emphasized that the Indian economy requires an urgent boost in demand and investment. Lowering the cost of borrowing is one of the most effective ways to achieve this objective.
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) had shifted to a neutral stance in October last year, signaling flexibility in policy changes based on economic conditions. With economic growth being a priority, there is a strong possibility of an interest rate cut to enhance liquidity in the banking system and drive consumption and investment.
According to Manish Singhal, General Secretary of ASSOCHAM, “We are confident the MPC will deliver it, expecting a demand-led economic recovery in the short to medium term.”
The moderation in food inflation and favorable Rabi crop prospects could provide RBI with more leeway to implement a rate cut. Singhal added, “Going forward, by March-April, food prices should stabilize further, giving elbow room for a reversal in the rate cut cycle.”
The global economy is facing multiple headwinds, including trade wars between major economies and geopolitical tensions. In such an environment, boosting India’s domestic economy through a rate cut could help mitigate external risks and sustain economic momentum.
With global uncertainties affecting international trade, Indian exporters require strong policy support to remain competitive. Singhal stressed the need for an enabling environment for exporters, stating, “Exporters need to be given strong support in a challenging environment.”
Additionally, ASSOCHAM has welcomed the RBI’s recent Rs 10,000 crore liquidity infusion by the National Housing Bank (NHB) into housing finance companies, a move aimed at revitalizing the real estate and banking sector.
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) is one of India’s leading trade and industry organizations. Established in 1920, ASSOCHAM serves as a key voice for businesses and industries across various sectors, advocating for policies that promote economic growth and development.
Policy Advocacy: Works with the government to create business-friendly policies.
Industry Research & Reports: Provides in-depth research on market trends, economic issues, and sectoral developments.
Business Networking: Facilitates collaborations between domestic and international businesses.
Skill Development: Promotes education, entrepreneurship, and skill-building initiatives.
Sustainability & Innovation: Encourages green initiatives and technological advancements for industrial growth.
Represents 4.5 lakh businesses, including small and large enterprises.
Works closely with ministries, policymakers, and international organizations.
Focuses on key sectors such as finance, infrastructure, manufacturing, IT, MSMEs, and exports.
As a major business chamber, ASSOCHAM continues to play a pivotal role in shaping India’s economic landscape by fostering innovation, investment, and global trade partnerships.
A 50-basis-point repo rate cut by the RBI could serve as a catalyst for economic growth, fostering investment, demand, and consumption. With food prices stabilizing, exporters facing global challenges, and the need to maintain growth momentum, ASSOCHAM believes the rate cut is a necessary step to ensure sustained economic expansion. The upcoming MPC meeting will be closely watched for key policy decisions that could shape India’s economic trajectory in the coming months.