Lending rate cuts key to economic recovery: Report
Lending rate cuts are the only viable way to economic recovery as they would perk up demand and push investments, a report has said.
The report said that structural reforms take long time of 5-10 years to reflect in growth rate or reviving the stranded projects.
In a research note, BofAML said, “Lending rate cuts hold the key to recovery. They would push up demand, put idle factories to work, and spark off investment when capacity is exhausted, in our view.”
The report further said that with 2017-18 likely to see sufficient USD 35 billion of reserve money, lending rates should come off 25 bps (0.25 percentage point) before the October-March busy season sets in (and 50 bps by September 2018).
Lending rate cuts are the only viable route to recovery rather than structural reforms which can take a long time of around 5-10 years to reflect in growth numbers, it adds.