WebSify
Follow us on
Mail
Print

Expert views: RBI cuts repo rate, keeps CRR unchanged

Source : REUTERS
Last Updated: Tue, Mar 19, 2013 06:55 hrs
An employee counts Indian currency notes at a cash counter in New Delhi

The RBI cut its benchmark policy rate by 25 basis points on Tuesday, for the second time since the start of the year in a bid to help revive flagging growth in Asia's third-largest economy, but warned that its scope for further policy easing is limited.

The Reserve Bank of India lowered its repo rate to 7.50 percent and left the cash reserve ratio for banks unchanged, in line with expectations.

COMMENTARY

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI


"In my opinion it is a very reasonable policy given the limited elbow room for RBI to ease more aggressively. But stance remains growth supportive. I do not expect immediate change in lending rates but around mid-April when liquidity situation is likely to return to normalcy, there is a possibility of transmission happening to some extent.



"The RBI had spoken of the limited scope for easing even in the January policy but have eased rates today. So I am surely expecting another baby cut of 25 bps in the May policy which will be influenced by the trajectory of core inflation which is expected to remain low. There is unlikely to be any aggressive easing, but easing will continue at a gradual pace going ahead."

ANJALI VERMA, ECONOMIST AT PHILLIPCAPITAL, MUMBAI

"RBI has continued to maintain limited room for monetary easing. I expect another 25-50 basis points of cuts in 2013. I expect headline inflation to decline based on expectations of a normal monsoon and falling crude prices. Even though there is a divergence between CPI and WPI, the moderation in core inflation below 4 percent has brought it within the RBI's 3-5 percent long-term average."

A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI

"I think the statement is balanced and is similar to January's stance. I wouldn't characterise it as dovish. The guidance emphasises the point that they are concerned about growth but space for more cuts is limited due to headline inflation and the divergence with CPI. We expect another 25 bps rate cut in May and then pause."

BACKGROUND

- There is a case for the RBI to cut policy rates, and the RBI should take comfort from the government's efforts to cut the fiscal deficit, Finance Minister P. Chidambaram told Bloomberg TV India a day before the monetary policy meeting.

- High food inflation is a negative for India's sovereign ratings as it filters through the broader economy, with adverse consequences for growth and the country's large fiscal and current account deficits, Moody's said on Monday.

- India's recent budget should have a softening effect on inflation, central bank governor Duvvuri Subbarao said last week, sparking rate cut hopes.

- Headline inflation picked up in February on higher fuel costs but non-food manufacturing inflation, which the central bank uses to gauge demand-driven price pressures slowed to 3.8 percent in February, the weakest pace since March 2010.

- Industrial output expanded for the first time in three months in January, an early sign that Asia's third-largest economy may have turned a corner, but the recovery was sluggish underscoring the need for lowering borrowing costs.

- The slowdown in economic growth is less supportive for the sovereign credit ratings, and the government may find it challenging to meet the revenue projections in its 2013/14 budget, an analyst at Standard & Poor's said on Friday.

- The man widely expected to be India's next central bank chief favours clipping the autocratic power of the role and giving more say to a monetary policy committee.

blog comments powered by Disqus
most popular on facebook
talking point on sify finance