Rbi Should Take High Intensity Measures To Stimulate Demand

Rbi Should Take High Intensity Measures To Stimulate Demand
03/10/2019 , by , in EXPERT ZONE

Authored by Shishir Baijal – Chairman & Managing Director, Knight Frank India

Despite progressive reduction by RBI in REPO rate amounting to a cumulative 110 basis points (BPS) over the last 6 quarters, there has not been any significant economic impact of these measures. Due to a multitude of reasons including slow economic output, rising unemployment rate, low consumer confidence, and actual passing on of these benefits to the retail borrowers, this scale of rate cut has failed to stimulate consumer demand and private investment in the economy. Flagging demand has now come to a critical point where it is imperative for the RBI to take some drastic steps to jump start the economy. We strongly believe that RBI should complement the Finance Ministry by taking some high intensity monetary policy measures that are indeed the need of the hour.

The foremost amongst these suggestions remain a substantial and single 50 basis point rate cut that can reinvigorate consumer sentiment towards consumption and push private investment. Besides, some strong and well-defined initiatives by RBI focusing on liquidity infusion, especially in the real estate sector would also go a long way in stimulating demand and in reviving the stalled supply. On this count, a temporary relaxation for risk provisioning norms for the stressed real estate sector loans would serve as a breather for projects that are trying hard to find their feet. Also, the recently announced stressed asset fund could have a much wider benefit if its ambit could include all residential projects beyond the mid and affordable segments besides allowing its reach for projects which are troubled for NPA and NCLT classification.

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