Cheaper loans better for trade, industry: Congress leader Rajeev Shukla on repo rate cut by RBI

New Delhi [India], February 7 (ANI): Congress leader Rajeev Shukla on Friday welcomed RBI's decision to reduce repo rate by 25 basis points (bps) to 6.25 per cent and said that it will help trade and industry as loans will get cheaper.
"I believe that more the loans become cheaper it is better for industry or trade because they have trouble repaying loans. They get caught in a vicious cycle of debt and their business gets into trouble. RBI should take positive steps. If it is taking steps it is a good sign and loans should become cheaper. If a businessman gets caught in a debt trap, they should help him, and not hand over his company to someone else," Shukla told ANI.
In his first Monetary Policy announcement on Friday, Reserve Bank of India (RBI) Governor Sanjay Malhotra stated that the Monetary Policy Committee (MPC) had unanimously decided to reduce the policy rate by 25 basis points (bps) from 6.5 per cent to 6.25 per cent.
Malhotra highlighted the challenges posed by the global economic landscape, noting that while high-frequency indicators suggest resilience and expansion in trade, overall global growth remains below historical averages. "Progress on global disinflation is stalling, hindered by services price inflation," Malhotra said.
Discussing global financial market dynamics, Malhotra pointed out that expectations regarding the size and pace of rate cuts in the United States had led to a strengthening of the US dollar.
He said, "The global economic backdrop remains challenging. The global economy is growing below the historical average, even though high-frequency indicators suggest resilience, along with continued expansion in trade. Progress on global disinflation is stalling, hindered by services price inflation."
This, in turn, resulted in hardened bond yields and significant capital outflows from emerging markets, causing sharp currency depreciations and tighter financial conditions.
"With receiving expectations on the size and pace of rate cuts in the US, the US dollar has strengthened. Bond yields have hardened, emerging market economies have witnessed large capital outflows, leading to sharp depreciation of their currencies and tightening of financial conditions, divergent trajectories of monetary policy across advanced economies, lingering geopolitical tensions and elevated trade and policy uncertainties have exacerbated financial market volatility," he said. (ANI)