In­dian cen­tral bank has room to ease right away: RBI Ad­vi­sor

The Pak Banker - - FRONT PAGE -

MUM­BAI: The Re­serve Bank of In­dia (RBI) has scope to cut in­ter­est rates im­me­di­ately given the govern­ment's pledge to nar­row the bud­get deficit, an ad­viser to the mon­e­tary au­thor­ity said. "There is room for them to move right away, though they might stick to the timetable as there isn't much time left for the April 5 pol­icy meet­ing," said Ashima Goyal, a mem­ber of the cen­tral bank's tech­ni­cal ad­vi­sory panel that makes pol­icy rec­om­men­da­tions to Gov­er­nor Raghu­ram Ra­jan. "The bud­get has de­liv­ered enough be­cause they have stuck" with their fis­cal con­sol­i­da­tion plans, she said, adding that "the other big thing is that the bor­row­ing fig­ures have come out much lower than ex­pected."

In his bud­get speech on Mon­day, Fi­nance Min­is­ter Arun Jait­ley af­firmed the ad­min­is­tra­tion's tar­get of nar­row­ing the short­fall to 3.5 per­cent of gross do­mes­tic prod­uct in the year start­ing April 1. Con­trolled spend­ing by the govern­ment will aid the cen­tral bank's fight against in­fla­tion, which ac­cel­er­ated to a 17-month high in Jan­uary. Sov­er­eign bonds have ral­lied this week on spec­u­la­tion that Ra­jan -- who has kept rates on hold for two straight pol­icy meet­ings -- will add to 2015's four in­ter­e­strate cuts. Jait­ley an­nounced gross mar­ket bor­row­ings of 6 tril­lion ru­pees ($89.2 bil­lion), lower than the 6.8-tril­lion ru­pee me­dian es­ti­mate in a Bloomberg sur­vey of 10 fixed-in­come strate­gists and econ­o­mists ear­lier in the month. The poll had fore­cast the deficit tar­get to be raised to 3.7 per­cent from 3.5 per­cent.

"There is ex­pec­ta­tion of a nor­mal mon­soon af­ter two years of drought, you have whole­sale-price in­fla­tion which has been neg­a­tive for more than a year, con­sumer-price in­fla­tion that's less than the cen­tral bank's tar­get, oil prices that are ex­pected to be soft for some time and then the global de­fla­tion­ary cy­cle con­tin­ues," Goyal said from Mum­bai. "Given all th­ese, they have some room to cut rates," she said, pre­dict­ing a re­duc­tion of 25 to 50 ba­sis points in the bench­mark re­pur­chase rate this year.

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