Indian industry on Tuesday welcomed RBI’s decision to cut rate by half a percent and said now they are looking forward to a faster transmission by banks as this would give a boost to the much needed investment and consumption demand in the economy .

“With today’s rate cut while the policy rate has been reduced by 125 basis point, only 30 basis point has been transmitted in form of lending rates. FICCI is looking forward to a faster transmission by banks as this would give a boost to the much needed investment and consumption demand in the economy”, said FICCI President Dr Jyotsna Suri.

“Further, the proposal to reduce the risk weights applicable to lower value housing loans is also a positive move. This is line with Government’s ‘Housing for all’ initiative and will lend support to the subdued activity in the housing sector. Any improvement in the housing construction sector will have a bearing on core sectors and thus propel overall investments and growth”, Suri added further.

Reserve Bank Governor Raghuram Rajan on Tuesday sprang a surprise by effecting a more-than-expected interest rate cut of half a percent to boost the economy and bring down cost of home, consumer and industry loans

CII Director General Chandrajit Banerjee said, “Industry is happy that the RBI has finally recognised the weakness in underlying economic activity and the need for a reduction in borrowing rates to drive a recovery.

“Today’s action by the RBI has removed considerable uncertainty with regard to the direction of borrowing costs faced by industry. The corporate sector will now be in a better position to drive a recovery in investment and growth.”

Yes Bank MD & CEO Rana Kapoor said that amidst easing inflation and lowered growth projection, the reduction in policy rate will help to reinforce the structural policy reforms of the government, allowing an investment-led job-creating revival in consumption demand.

Assocham Secretary General D S Rawat termed the Reserve Bank’s move to slash key rate a “pleasant surprise” and said Governor Rajan has delivered a Diwali bonus.

“What is even more heartening is the kind of resolve by Governor Dr Raghuram Rajan to work with the Government and ensure that the banks pass through the rate cut without delay.

“As much as 125 bps interest rate cut has been announced since January this year. The ball is certainly in the court of the banks, which must now rise to the occasion,” said Rawat.

As RBI’s decision likely to positively affect auto and real estate sectors, so people from both the sectors have welcomed Governor’s decison.

“This is a festival gift. Traditionally, during the festive season, the auto industry witnesses sales growth of 15-20 per cent, which was missed in the last couple of years. This reduction in rate by the RBI has assured that the growth will be achieved,” said Hyundai Motor India ltd (HMIl) Senior Vice President (Marketing and Sales) Rakesh Srivastava

According to Gaursons India’s MD Manoj Gaur, “There were huge expectations by the sector from RBI this time and finally it has been fulfilled. We were looking ahead for rate cut which could boost the real estate sector in a big way. With festive season around the corner, the timing of the RBI to reduce the rate could not have been better.”

However, engineering exporters’ body EEPC India’s Chairman Anupam Shah said a special carve-out is required for exporters who are in a state of distress.

“EEPC would urge the RBI, the Finance Ministry and Commerce Ministry to work together with the exporting community so that they can be given a carve out of interest subvention of a minimum two per cent at least till the situation takes a turn for the better,” Shah said.

PHD Chamber President Alok B Shriram said, “To spurindustrial growth, which is merely growing at a rate of 3.5 per cent in April-July 2015-16 and enhance our exporters’ competitiveness in the international markets, conducive policy environment becomes crucial”.

“With CPI and WPI numbers very much within comfort zone and industrial growth not picking up, RBI’s 50 bps cut in policy rate is a decisive pro-growth move and is welcomed.

BIlT Paper CEO and Managing Director B V Yogesh Agarwal said it will translate into improved sentiment, more consumer spending and lower EMIs.

“The corporates will also benefit from reduced interest burden and the banks have a lot to cheer as it will lead to more credit demand. The rate cut is a key trigger to boost investment demand in an economy where credit growth has dipped to a multi-year low,” he said. Godrej Group Chairman Adi Godrej said the rate cut is “very good” for the economy.

“I think investments will rise. Consumption of items which are typically financed, like residential real estate, automobile and consumer durables will rise quite considerably. It is good for the country’s economy.

The timing is very good as the festive season is coming along,” he said.

Moreover, the policy to gradually reduce the SlR rates over several quarters is an excellent one and that would add to growth, he added.

“To my mind, if you pass GST sometimes next year, it would lead to India getting double digit GDP growth,” Godrej said.

Videocon Director and CEAMA’s Past President Anirudh Dhoot said: “Investments would be encouraged in the industry as it would create positive environment for the business as corporates would get relief on their finance cost. We would have to work out on its impact, but definitely its a very good news for the industry.”

Asked whether the rate cut would help Videocon’s durable segment in the festive sales, Dhoot said: “Definitely, it will help to increase the festive season sales. It would create a positive impact.”

JK Paper limited Vice Chairman & MD Harsh Pati Singhania said: “What is now needed is transmission of this by banks in their lending rates. This will help reduce cost of consumer finance and boost demand in various sectors, especially in view of the upcoming festive season.

“The decision to permit Indian corporates to issue rupee denominated bonds overseas is also welcome, particularly lifting of restrictions on end-use of funds. Of course, details will have to be seen when they are issued.”

Chandra Shekhar Ghosh, Founder and MD, Bandhan Bank, said: “This will certainly work as a booster dose for economic growth. If indeed the Government decides to cut the small savings rates, the banks will be in a better position to cut deposit rates and that will lead to faster transmission of the monetary policy. In other words, the banks will be able to cut the loan rates faster.”