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Journalism of Courage
MUMBAI, Mar 1: For once there was unanimity. The Reserve Bank of India’s decision to cut the bank rate by 1 per cent — from 9 per cent to 8 per cent and CRR by half percentage point is being interpreted as a positive signal, but no major push for more investments.Neither was it a surprise. The Indian Express spoke to several corporate heads to get their reaction.
According to Essar group finance director SV Venkatesan, "The economic survey and the budget did indicate that bank rates would drop. The move, though good, is a belated one. It should have been done a year ago when the industry moved into a recession. While the move may not spur borrowings as investment decisions are based on more than an interest rate drop, the message is very important. The signal is that inflation will be kept under control."
Videocon group advisor SK Shelgikar said, "Investment is more a function of risk than a function of interest rates, so I really do not see investment picking up merely because it has been cut by 1 percent. Eventually, the sovereign rate will have to settle to an inflation adjusted rate of 3.5-4 per cent.
Most others also see the move will do more for the climate than having a direct impact on investment growth. Says Hindustan Construction Company chairman-cum-managing director Ajit Gulabchand, "A very good move that will go a long way in reducing the cost of borrowing for new loans and therefore improve the returns on stock-market investments. It is an important stimuli."Blow Plast CMD Dilip Piramal calls it a "step in the right direction, but investment decisions are not taken on the basis of a per cent drop in interest rate."
For those looking at fresh borrowings this year, it’s good news. According to L&T chief treasurer L Krishnakumar, "This has come at the right time. It may facilitate the much-needed funding for infrastructure projects." He also warned "it should be sustained throughout the year, but that depends on the inflation rate and long-term government borrowing." Gujarat Ambuja Cementstreasurer Anil Singhvi feels that the move was expected after finance minister Yashwant Sinha’s statement that interest rates should come down. "Triple-A rated companies will benefit as they would be able to mop up funds at cheaper rates."
The co-ordinated effort has won approval. Says Shailesh Haribhakti, chartered accountant, "It is a perfect case of fiscal and monetary policies acting in concert. The industry will benefit immensely from the pro-active move by the RBI."Vikas Kasliwal, director, S Kumar group feels much the same, " This indicates that RBI and finance ministry is working in tandem to revive the economy. It is definitely a boost to the core sector and equity markets.
