Experts hope another 25 bps rate cut by Reserve Bank for fourth time in a row to boost economic activities

New Delhi: With inflation under control, experts are expecting another 25 basis points rate cut by the RBI for the fourth time in a row to boost economic activities.

The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, is deliberating on the macro-economic situation, and is scheduled to announce its third bi-monthly policy of the ongoing fiscal on Wednesday.

The MPC meeting began on Monday.

Speculations are rife about another rate cut with inflation well under RBI’s comfort zone, slowing automobile sales, muted growth in infrastructure industries, concerns over spread of monsoon and slump in stock market.

Finance Minister Nirmala Sitharaman held reviewed credit bursal by banks at a meeting on Monday and asked banks to pass on 75 basis points (bps) rate cut by RBI since February to borrowers.

 Experts hope another 25 bps rate cut by Reserve Bank for fourth time in a row to boost economic activities

Representational image. Reuters.

Talking to reporters after the meeting, SBI chairman Rajnish Kumar had said he was hopeful of another rate cut by MPC.

“I hope so, everybody is expecting a rate cut…everybody says 25 bps (would be the reduction),” Kumar said when asked about his expectations from MPC.

The industry also expects the six-member MPC to take steps to improve liquidity situation and also ensure transmission of rate cuts to borrowers by the banks.

Industry body CII in a statement said the central bank started its interest rate easing cycle in February 2019, taking cognizance of the headwinds to growth and inflation reading remaining below the RBI’s target of 4 percent.

It also wants the RBI to slash cash reserve ratio (CRR) by 50 bps which will release around Rs 60,000 crore into the system.

The real estate sector too is expecting further easing in the monetary policy.

In its June policy review the RBI had signalled more easing as it looked to support an economy growing at the slowest pace since the BJP-led NDA came to power in 2014.

Experts are also of the opinion that slowdown in high frequency indicators, like automobile sale and core sector industries, will be a major factor before the MPC while reviewing the monetary policy.

India’s economic growth rate slowed to a five-year low of 5.8 percent in January-March 2018-19, due to poor performance in agriculture and manufacturing sectors.

As per the Central Statistics Office (CSO), GDP growth during 2018-19 stood at 6.8 percent, lower than 7.2 percent in the previous financial year.


Updated Date: Aug 06, 2019 17:12:29 IST

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