Finmin builds case for rate cut by RBI
Citing persisting inflation, the RBI has refrained from cutting key policy rates despite industry citing a fall in industrial production and persuasion by the Centre.
The finance ministry had, just before the last policy review of the RBI, released a five-year fiscal consolidation plan, apparently to impress upon the RBI that it is serious about bringing down the fiscal deficit to 5.3% of the GDP this fiscal and further down to 3% by 2016-17.
This year’s 2012-13 Mid-Year review said, “The seasonally adjusted annualised rate of inflation (SAAR) indicates the momentum of NFM inflation is currently on a decline.” The review noted that in addition to the headline WPI (whole-sale price-based inflation) and CPI (consumer price index) inflation, RBI has been monitoring NFM inflation as the key measure of core inflation that will influence its policy stance.
The reason for this emphasis is partly because demand conditions, which can be affected by the RBI interest rate policy, are better measured by NFM inflation, which is also relatively sticky, it explained.
The WPI inflation in November had moderated to a 10-month low of 7.24% from 7.45% a month ago, while the retail inflation (CPI) rose to 9.9% in November from 9.75% in October. The
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