On 6th June the RBI Governor, Shaktikanta Das has announced that the RBI cuts Repo Rate by 25 basis points to 5.75 per cent for the 3rd time in a row. This third straight interest rate cut by the top bank is expected to go for an interest rate cut amid dismal gross domestic product growth, subdued investment and slowdown in consumption space.
The Monetary policy committee has also changed the stance of the policy from neutral to accommodative. The move is likely to bring down the loan EMIs. RBI has made a similar quick move in 2013 to revive the growth rate that dipped to a decade low. The economists and markets considers that the rate cut as a need of the hour as high-frequency data have been showing signs of distress in the economy.
“Weak global demand due to escalation in trade wars may further impact India’s exports and investment activity. Further, private consumption, especially in rural areas, has weakened in recent months. However, on the positive side, political stability, high capacity utilization, the uptick in business expectations in Q2, buoyant stock market conditions and higher financial flows to the commercial sector augur well for investment activity” according to the RBI statement.
The Reserve Bank of India will not hesitate to take any measure which is required to maintain the financial stability of the system including, short-term and long-term governor said Shaktikanta. This will benefit the commercial businesses that are short of funds.