Press Release

RBI rate cut - A boost to capex & consumption: ASSOCHAM

ASSOCHAM lauded RBI’s repo rate cut, highlighting its potential to accelerate investments, boost consumer demand, and revitalize credit-sensitive sectors.

ASSOCHAM expressed its delight at the 50-basis point reduction in policy interest rates by the Reserve Bank of India (RBI), describing the continued accommodative policy stance as a catalyst for boosting capital expenditure and demand across various sectors of the economy.

“The RBI Monetary Policy Committee’s repo rate cut of 50 basis points and the cash reserve ratio (CRR) cut of 100 basis points are expected to reduce lending rates, spur economic growth, and encourage industry borrowing for capex. It will also stimulate business growth through enhanced credit, particularly in interest rate-sensitive sectors such as real estate, automobiles, infrastructure, exports, and the MSME segment,” said ASSOCHAM President Mr. Sanjay Nayar.

Equity markets may respond positively, particularly in sectors such as banking, FMCG, capital goods, and housing. Even bond yields are likely to ease further, improving the valuation of fixed-income securities.

Sharing the RBI’s pro-growth outlook for India’s economic expansion, ASSOCHAM Secretary General Mr. Manish Singhal said: “A rate cut will lower borrowing costs for both consumers and corporates, stimulate credit demand, and revive consumption. The agricultural sector will also benefit, as lower interest rates can reduce borrowing costs for farmers and agri-businesses—especially ahead of the sowing season. Improved rural demand, if effectively supported through rural credit channels, could further boost rural consumption.”

These rate cuts typically exert downward pressure on the Indian Rupee (INR), especially if the real interest rate differential with the U.S. narrows. However, strong foreign exchange reserves and robust capital inflows into Indian equities and bonds may help buffer currency volatility. A mild depreciation of the INR could actually benefit exports, particularly in IT services, pharmaceuticals, and engineering goods. On the global stage, other central banks are signaling neutral or slightly accommodative stances for 2025, as inflation moderates worldwide. This gives the RBI greater flexibility to reduce rates without risking a sharp capital outflow. The global environment remains broadly supportive of India’s rate cut cycle, thanks to low inflation abroad, manageable oil prices, and dovish policies by peer central banks, all of which provide added comfort to the RBI.

However, ASSOCHAM cautioned that the RBI will remain vigilant in the face of global uncertainties, including trade disruptions, oil price volatility, and weather anomalies, among other risks.