With inflation under control, interest rates will come down in the near future, top banker Naina Lal Kidwai today said, hoping that the Reserve Bank will lower the benchmark rate by 25-50 basis points by the year-end.
“I think we are already hearing from the (RBI) Governor that as inflation looks in check, he will continue to look at bringing interest rates down.
“So, I have no doubt that interest rates will come down. In fact, I hope that by the end of the year, we will see a 25-50 basis point further reduction,” Kidwai told PTI on the sidelines of a Ficci event here.
However, she added that “the key was not what RBI does, but what banks do in turn and the issue has really been that the transmission of the interest rate decline hasn’t happened”.
The HSBC India head also noted that steps have been taken on the strengths that need to come to our public sector banks, adding that much still needs to be done.
On the logjam in Parliament regarding the Goods and Services Tax (GST) Bill, Kidwai said: “We all want it, all the parties want it, it is part of the ideology of the Congress party, it is the BJP’s agenda as well and yet it doesn’t move forward.
“So, these frustrations are worrying, where the political crosspurposes don’t necessarily match up to an ideological one.”
On fears of the Chinese economy slowing and if that posed opportunities for India, she said: “The fact that the Chinese economy is slowing to 7 per cent doesn’t instantly give India an opportunity as China is a huge exporter and India is not.
“We do not have the capability and the capacity to compete with China and its exports. A Chinese devaluation actually makes their exports even more competitive.”
She said the Chinese slowdown, along with the devaluation of the renminbi, has some “pretty negative implications” for India as well and that is something we need to watch out for.
On whether she expects a financial meltdown of the type witnessed in 2008-09, Kidwai said: “I don’t think people are predicting that, but the fear is the same way the Western world wobbled the last time. China’s strength in the system causes wobbles today, so is it deep enough to cause a whole meltdown? Probably not.”
“… I hope other South Asian countries, including India, is strengthening. So, unlike what happened in the last financial crises where everything melted at the same time, you do have areas that are looking stronger than others.
But it is clearly a time to watch for opportunities and challenges.”