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Experts disappointed over RBI’s “no rate cut” decision; seek FM’s intervention

Updated: Jun 07, 2016 09:30:12am

Experts disappointed over RBI’s “no rate cut” decision; seek FM’s intervention

New Delhi, June 7 (KNN) The Reserve Bank of India’s attitude is not good and the Finance Minister should intervene himself, said Economist VK Suri after the review of monetary policy in which the Cash Reserve Ratio and Repo Rate were unchanged.

Talking to KNN, he said, “RBI being an autonomous body does not mean that you don’t focus on the things which are clearly visible. World economists are telling that there is a scope of rate cut. RBI should focus to growth with the inflation.

Reserve Bank of India Governor Raghuram Rajan on Tuesday maintained status quo on key rates and kept repo rates unchanged at 6.5 per cent in its bank’s bi-monthly monetary policy review.

The Economist said “We don’t know about the monsoon that would be normal or above normal. The reasons are not understandable.”

He alleged the Governor of RBI Raghu Ram Rajan that he is highly qualified but he is more concerned about the inflation rather than the growth.

“The RBI should surprise market after hike of 0.50 rather than 0.25. The domestic investors could get some enthusiasm for investing after hike. It is unfortunate that the RBI governor could not take right steps” he added.

He further said that Governor says that if inflation is controlled then the growth will automatically come. But I also and along with others refer that it is right time to concern with the growth. Growth will also take care of inflation. Monetary policy has nothing to do with the inflation and other things. 

Rohit Gadia, Founder & CEO, Capital Via Global Research Limited said that as expected, the RBI has kept repo rates unchanged at 6.5% and also kept CRR at existing 4%. The monetary easing cycle is most probably at near the end. “Before further cut RBI probably want to see the outcome of upcoming Fed meet and the Brexit referendum.”

He further commented that going forward, the factor like how monsoon progresses and the effect on CPI inflation of 7th pay commission implementation will be key before we can expect a  25 bps cut in August.

He, however, said, “Even if that’s happening we expect a long pause thereafter. RBI since 2015 reduce rate almost 150 bps but showed its concern that banks failed to pass the benefit. The real interest rate of 1.9 per cent which is already down from an average of 2.26 per cent and in the preferred range of RBI, which is 1.5-2 per cent keep chances of aggressive rate cut minimal.” (KNN Bureau)


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