Inflation likely to remain in 7-8% range during 2013

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Ashley Coutinho: Feb 01 2013, 00:14 IST

The RBI may opt for one more repo rate cut in April this year before signalling a pause, believes Dhawal Dalal, executive vice president & head — fixed income of DSP BlackRock Investment Managers. In an interview with Ashley Coutinho, Dalal says that the headline inflation is likely to remain between 7% and 8% in 2013. He advises investors to invest in high-quality medium and long-duration funds based on their risk appetite for 6-12 months.

What is your reading of the central bank’s move to cut the repo rate and the cash reserve ratio (CRR) by 25 basis points each?

The Reserve Bank of India has taken cognizance of the weak economic growth, tapering of heading inflation as well recent steps taken by the government to address twin deficits. The RBI has acknowledged that while headline inflation is still higher than their comfort zone, a reduction in repo rate along with a CRR cut will likely reduce the cost of funds for the borrowers going forward and may augment the investment cycle going forward. This may, in turn, support the economic recovery.

Do you think the inflationary pressures are finally easing?

We believe that the headline inflation is likely to remain between 7% and 8% in 2013. The RBI governor has also echoed the same in his speech after the recent policy meet, wherein he mentioned that he expected the headline inflation to remain at around the current level on average in 2013. While non-food manufacturing prices as well as fuel

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