With the Reserve Bank of India (RBI) set to declare its third consecutive repo rate reduction on June 6, 2025, industries like information technology (IT), manufacturing, and startups are attentively observing the possible repercussions for business expansion and investment. Although repo rate adjustments might not have a direct effect on these sectors as they do on consumer loans, the wider effects on credit availability, investor sentiment, and capital costs often influence their business environment.

By lowering borrowing costs, a decrease in the repo rate can facilitate access to capital for companies in these sectors. Industry experts underscored the appropriateness of a gradual shift to lower interest rates, given the prevailing macroeconomic context of robust GDP growth and inflation kept within the RBI’s target range of 4-6%.

When interest rates decrease, the amount of money in circulation grows effectively, which spurs investment and borrowing.  In capital-intensive industries like manufacturing, where substantial funding is needed for operations and growth, a decrease in interest rates can serve as a significant catalyst.

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Sachin Jain, Managing Partner at Scripbox, stated, “Lower borrowing costs directly translate to an enhanced investment capacity, accelerated expansion, and increased operational agility, particularly considering the long gestation periods and high asset turnover ratios typical in the sector.”

According to Anil K. Sharma, Director at FINAC by AKSSAI ProjExel, “Lower interest rates make borrowing more affordable, which allows companies to invest in technology, expand operations, and drive innovation.  This extra liquidity boosts investor confidence, facilitating access to necessary growth capital for both startups and established businesses.

The IT sector and startups are also important beneficiaries. With capital becoming cheaper, startups can pursue more aggressive investments in innovation, product development, and market expansion. 

IT companies, which often seek to scale through technology and talent, can take advantage of lower rates to improve their investments in infrastructure and human capital.  Moreover, a low-interest environment usually suggests price stability, which encourages consumer spending—a favorable development for sectors that cater to digital, tech-driven, or new-age consumption patterns.

A decrease in interest rates can, in the short run, bolster business confidence and expansion strategies, resulting in a heightened demand for labor. With manufacturing units ramping up production and startups pouring resources into expansion, the demand for skilled and semi-skilled workers increases.  The increase in hiring is especially apparent in sectors focused on growth, such as IT and startups, where enhanced funding allows for rapid scaling of projects and teams.

“Over the short term, a cut in repo rates results in greater employment and job generation as companies grow to satisfy the increasing demand.  In the long run, lower rates can help maintain stable employment trends and promote skill development, especially in technology-driven sectors.  “However, the overall effect hinges on how effectively banks transmit these rate changes and the prevailing economic conditions,” said Anil K. Sharma.

This expansionary monetary environment could lead to sustained job creation over the long term.  Although lower inflation might moderate the pace of aggressive wage growth, the wider employment landscape is expected to gain from heightened economic activity and business expansion.

The long-term effects of a low-interest rate regime are generally beneficial for sectors like manufacturing, which has a significant employment multiplier effect, and startups, which often create new job categories and roles. 

Nevertheless, there are other factors that impact employment trends, such as automation, global demand, and policy incentives.  In general, a favorable interest rate environment fosters business growth and investment, which usually leads to increased employment in IT, manufacturing, and startup ecosystems.