Mumbai: A lower repo lending rate for commercial banks, will reduce interest cost on automobile and home loans, thereby ushering in growth. Currently, high GST tax rate, along with stagnant wages, farm distress and liquidity constraints have demoralised auto, home and capital goods buyers.
Even the high frequency indicators suggested moderation in economic activity. As per the monetary policy statement, the MPC was of the view that the standard 25 basis points reduction might prove to be inadequate in view of the evolving global and domestic macroeconomic developments.
Acknowledging the departure from the standard policy of reducing or increasing key rates in the multiples of 25, RBI Governor Shaktikanta Das said the practice was not “sacrosanct” and that the MPC found 35 basis points as sufficient for the time period, as 25 basis points would have been “inadequate” and 50 would have been “excessive”.
Historically, the central bank has been either reducing or increasing rates in the multiples of 25 basis points. On the growth front, the MPC reduced its forecast to 6.9 per cent from 7 per cent in FY2019-20.
The GDP growth for the first quarter of FY2020-21 is projected at 7.4 per cent. In the June resolution, MPC had projected the real GDP growth for 2019-20 at 7 per cent — in the range of 6.4-6.7 per cent for H1:2019-20, and 7.2-7.5 per cent for H2 — with risks evenly balanced. (IANS)