RBI ready for policy gear shift to enter growth lane
“We maintain our view of a 75 basis points cut in 2013 and expect 50 basis points between January and March,” Rohini Malkani, economist at Citigroup, observed.
In its mid-term assessment, the government on Monday cut the GDP estimate for 2012-13 to between 5.7 and 5.9% from the earlier 7.6%. Factory output between April and September has grown at just 0.7% though it jumped 8.2% y-o-y in October largely due to a base effect. GDP for the September quarter came in at 5.3% higher than the 5.5% for the June quarter.
“The RBI has taken a cautious stance on easing policy rates because retail and wholesale inflation have shown contradictory trends,” C Rangarajan, chairman of the Prime Minister's Economic Advisory Council observed, adding “perhaps the RBI wants to start a policy, of cutting rates, that could be continued. Wholesale inflation for November came in at 7.24% with core inflation at a three-year low of 4.5%.
Leif Eskesen, chief economist for India and ASEAN at HSBC said: “The RBI kept policy rates on hold in light of the persistence of inflation and lingering upside risks to inflation. However, it is gearing up for potential policy rate cuts early next year, assuming inflation risks recede and policy progress on other fronts is sufficient.”
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