Reduction in repo rate to increase demand in various sectors, sales of houses and vehicles to also increase
New Delhi| The first cut in the repo rate after five years will act as a catalyst to increase demand in various sectors of the economy. Sanjay Nair, chairman of industry body Assocham, said, this decision of RBI will help in increasing demand in many key sectors including housing, automobile and consumer durables.
Nair said, if the downward trend in inflation rate continues, we can expect further rate cuts in the next few quarters. Credai, a real estate organization, said the 0.25 percent cut would have limited impact. This has made the case for further cuts to strong incentives in housing demand. The RBI’s decision to reduce the repo rate complements recent announcements in the Budget, which aim to boost spending and economic growth. At the same time, NAREDCO said, interest rates on home loans will reduce, which will boost house sales. We expect an increase in sales, an improvement in cash and a reduction in the number of unsold houses. Additionally, developers will be encouraged to launch new projects.
C. S. Vigneshwar, president of the Federation of Automobile Dealers Association (FADA), said, The cut fully coincides with the Finance Minister’s announcement in the budget not to tax amounts up to Rs 12.75 lakh. This will increase the disposable income of consumers. With auto loans becoming more affordable, we expect demand for price-sensitive two-wheelers and entry-level cars to strengthen. Tarun Garg, Whole-time Director and COO, Hyundai Motor India, said the announcement of interest rate cut bodes well for the overall demand sentiment going forward. This is expected to increase the demand for vehicles in rural markets also.
Ajay Kumar Srivastava, MD and CEO of Indian Overseas Bank, said, inflation rate is expected to decline further in the next financial year. GDP is projected to grow by 6.7 per cent. Repo rate cut will boost economy, investment and consumer demand. SBI Chairman CS Shetty said, the decision to start a phase of easing along with reducing interest rates has been timely, relevant and well clarified. Grant Thornton India partner Rishi Shah said, this decision of RBI is a sign of a promising start. The repo rate cut reflects the central bank’s commitment to supporting growth.
