Experts Call for Bolder Rate Cuts as RBI's Modest Move Spurs Mixed Reactions

The Reserve Bank of India's 25 basis point repo rate cut has received mixed reactions, with experts urging more aggressive cuts given benign inflation and sluggish growth. Industry leaders argue that deeper reductions are needed to enhance economic growth, despite RBI's shift from a 'neutral' to an 'accommodative' stance.

The Reserve Bank of India's recent decision to cut the repo rate by 25 basis points, lowering it to 6 percent, has sparked varied reactions from industry experts. While some see the decision as aligning with expectations, others believe it falls short of what is necessary to stimulate economic growth. Economists argue that a more aggressive reduction was essential amid current economic conditions.

Among the critics is Jyoti Prakash Gadia, Managing Director at Resurgent India, who suggested the RBI should have adopted a more expansionary approach. He emphasizes that given the controlled inflation, expected normal monsoon, and sluggish growth, a 50 basis point cut could have better supported a growth trajectory. His comments were joined by those of Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, who warned of global economic risks impacting India. Bhardwaj sees potential for additional rate cuts between 75 to 100 basis points in response to these challenges.

Industry leaders like Chandrajit Banerjee, Director General of CII, highlight the critical need for reducing real interest rates to boost investment demand. Despite welcoming the cut, they argue that rates remain high, hindering investment. Meanwhile, real estate stakeholders such as Boman Irani, President of CREDAI National, view the rate cut favorably, noting its potential to improve home loan affordability and stimulate housing demand. The RBI's move, while cautious, has set a foundation for further action that many believe should be more robust to drive growth.

(With inputs from agencies.)