Rate hikes by RBI a certainty in 2016: Tata Securities

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Mumbai | Published: July 24, 2015 7:00:53 AM

Not ruling out rate cuts for this year, brokerage firm Tata Securities said RBI will be in fact hiking the rates from 2016.

Not ruling out rate cuts for this year, brokerage firm Tata Securities said RBI will be in fact hiking the rates from 2016.

“We don’t rule out a rate cut in August. However, we see a strong probability that rates will begin to rise in 2016,” Tata Securities research and strategy head Anand Shanbhag told reporters here.

Shanbhag termed expectations of 50 bps and 75 bps rate cuts as “unrealistic”.

Maintaining that inflation is not the sole criterion for RBI’s policy action, Shanbhag noted that currency rates, GDP growth and global factors too will play a key role in 2016.

“When economy grows and GDP is expected to accelerate further, it virtually leads to a review by RBI and the rates remain unchanged for a period of time,” Shanbhag added.

“I don’t think RBI is taking a call on rates cuts in the next six months, but in 2016, it will definitely be hiked.”

Referring to the inter-play between demographics and the spending capacity, a research report by Tata Securities found that the population of those under 15 years has been shrinking since 1971 and by 2021, it’s expected to be 25 per cent of the entire population.

“The pace of shrinking has become quite rapid… in another 5 years, the proportion will go to 25 per cent, almost half of what it was in 1971,” Shanbhag said.

The report noted that the savings by senior citizens would be much larger than those in the age group of 15-59 years. The younger age group, it said, has a “rising propensity to spend”.

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