RBI rate cuts unlikely soon: Rangarajan
“Industrial output is weak and core inflation is coming down. But we need to watch for some more time. There is still some time for RBI to take a decision,” Rangarajan said when asked if weak growth prospects and moderation in inflation increases chances for rate cuts in near term.
After cutting rates by 50 bps in April, RBI has left rates unchanged but lowered statutory liquidity ratio by 100 basis points to 23% in July and cut cash reserve ratio by 50 bps in two steps between September and October.
Last week, the economic gloom was compounded after government data showed the index of industrial production fell 0.4% in September, exports declined by 1.6% in October and 2G auction fetched just R 9,400 crore as against the target of R 40,000 crore.
Slower growth prospects and a worsening of fiscal situation weakened investor sentiments and led to a sharp depreciation in the rupee. The local currency had appreciated to R 51.75 to a dollar in early October but started sliding since then and touched R55.16 last Friday.
“The rupee will stabilise at this level,” Rangarajan told reporters after a conference organised by Exim Bank.
Although weaker currency unduly widens the trade and current account deficits by making imports costlier, Rangarajan said “the
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