New Delhi: Welcoming RBI's decision to cut policy rate by 0.25 per cent, the Finance Ministry's top functionaries on Wednesday said it will bring down EMIs, increase demand and boost economic growth. "What is going to happen to rate cycle moving forward is going to be driven by data and RBI has signalled this clearly," Minister of State for Finance Jayant Sinha said soon after the rate cut action by RBI.
He said there is a further room for easing policy rate. "We have said in Parliament that we are pursuing a very prudent fiscal consolidation road map. Our aim is to move growth onto a sustainable, non-inflationary path... We are in a situation where we see EMIs (Equated Monthly Installments for loan repayments) coming down.
"RBI has appreciated budget's 'fine balance'. It is a welcome step for all citizens of India as everyone is looking for near-term boost in economy," he added. The Reserve Bank on Wednesday surprised markets by reducing the benchmark interest rate by 0.25 per cent to 7.5 per cent on the back of softening inflation and the government's commitment to continue fiscal consolidation programme.
Revenue Secretary Shantikanta Das said it augurs well for business and will prompt people to go in for housing and consumer loans which will boost demand and growth. "It augurs well for Indian business, Indian industry, for common citizens who want to take housing loans and other kinds of loans from banks," Das said.
"The government has done its bit by presenting a progressive and growth-oriented Budget. The RBI has responded by reducing the rates and now it's for business, industry and people of the country to make the best advantage of it," he added. Soon after RBI announcing a much-awaited rate cut, Chief Economic Advisor Arvind Subramanian said that the global rating agencies should look at upgrading their stance on India's credit outlook.
"Now we have a 50 basis points rate cut (in two tranches within two months) and I think that is good for the economy and all rate cuts benefits... If the outlook is looking good, the rating agencies should draw their lessons from that on improving the outlook," Subramanian said.
He further said that the rate cut is consistent with the government's views in the last week's Economic Survey and thereafter in the Union Budget for the outlook on inflation and for the outlook on overall economy.
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