RBI rate cut to positively impact automobiles sector
The RBI on Friday cut repo rate by a higher-than-expected 50 basis points to prop up growth, which has slowed to a four-year low of 6.5 per cent in FY25.
Following the rate cut, the key policy rate eased to a three-year low of 5.5 per cent, providing relief to home, auto and corporate loan borrowers. "Such reduction in repo rates would have a positive impact on the auto sector since it would lead to increased accessibility to finance at reduced costs, thereby creating a positive sentiment amongst the consumers in the market," the Society of Indian Automobile Manufacturers (SIAM) President Shailesh Chandra said in a statement.
The Automotive Component Manufacturers Association of India (ACMA) said the RBI's decision to reduce the repo rate by 50 basis points and to ease the Cash Reserve Ratio is a timely and proactive step toward stimulating domestic demand and supporting industrial growth, especially in the backdrop of persistent global headwinds.
"The reduction in interest rates is expected to translate into lower borrowing costs for both consumers and businesses, thereby providing a much-needed boost to the automotive sector, which has been navigating a complex macroeconomic environment," ACMA President Shradha Suri Marwah stated.
The infusion of liquidity through the CRR cut will further ease working capital pressures, particularly for MSMEs that form the backbone of the auto component industry, she added. Mahindra Group CEO & MD Anish Shah said the move demonstrates the RBI's confidence in the macroeconomic fundamentals and its proactive approach to supporting sustainable expansion. The rate cut will serve as a positive catalyst for consumption and investment, particularly in interest-sensitive sectors such as automobiles, housing, and MSMEs, he added. It will also ease borrowing costs, improve liquidity, and further strengthen the momentum behind India's infrastructure and manufacturing push, Shah said.
Renault India Country CEO & MD Venkatram Mamillapalle said the policy is expected to strengthen liquidity and accelerate the transmission of lower interest rates to consumers, which will spur demand in the economy.
"For the automotive sector, this translates directly into improved access to affordable vehicle financing, especially in the entry and mid-level segments," he stated. PTI
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