The across-the-board rate cuts by the Reserve Bank of India (RBI) is widely expected to bring in more liquidity into the system by reducing the cost of borrowing for both corporates and retail consumers. The industry sees this as an extremely positive move as it signals the easing of interest rates and also suprring of demand. Both these factors have taken a toll on corporate earnings and were placing additional pressure on their capacity expansion plans, many of which were kept on hold.

“This will infuse liquidity in the system and lead to reduction in interest rates. With this, not only the interest rates would subside but enough liquidity comes into the market to help Indian Inc. expand, diversify and modify its plans,” said D S Rawat, secretary general of Assocham.

Vinod Juneja, MD of Binani Cement, while welcoming the move added that this would encourage banks to lend to the corporate sector proactively. “These measures might have resolved the liquidity problem but the confidence of banks to lend to the manufacturing sector is yet to build up. Banks are hesitating to lend to the manufacturing sector with the reason that there is a feeling that there may be further recession and banks money might get stuck up,” he said.

The cement sector is facing the brunt of high input costs, lower demand due to reduced construction activity.

Its the real estate sector that will breathe the loudest sigh of relief as it was one of the most hit sectors. High interest rates and lack of availability of funds, thanks to tight money conditions had impacted costs and the high home loan rates, the demand. In fact, the DLF head had recently met with the finance minister and the developers association the banking community to ease the fund flow.

Speaking to FE recently, Raja Kaushal, executive director of global realty consultancy Atisreal Redwoods had said demand for residential and commercial property had dipped across all major cities in India , compelling developers to offer massive discounts to buyers.