RBI Governor Dr. Raghuram G. Rajan has lived up to India Inc's high expectations. By reducing the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points from 7.25 per cent to 6.75 per cent with immediate effect, Rajan has demonstrated that the RBI can indeed be accommodative when required.

Interestingly enough, a survey conducted by ASSOCHAM had shown that the industry was expecting exactly a cut of 50 basis points in the wake of continued deflation on WPI for the tenth month in a row!

Union Finance Minister Arun Jaitley welcomed the RBI's decision and said that ‘this action also signals that the RBI is able to provide policy support to the real economy and help its recovery'. "The rate cut, combined with actions taken and planned by the Government, will help boost confidence and investment, and help realise the economy's medium-term potential growth rate," Jaitley said.

"We are equally encouraged by RBI's statement that the policy stance will continue to be accommodative and that it would work with the government to ensure that impediments to banks on passing on the policy rate cuts in the form of lower lending rates would be removed. 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 Dr Jyotsna Suri, President, FICCI.

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