Arvind Panagariya pitches for a larger dose of rate cut

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Updated: June 26, 2015 10:04:54 AM

The National Institution for Transforming India (NITI) Aayog vice-chairman Arvind Panagariya told The Financial Express there is room for a larger dose of interest rate cuts now.

Arvind Panagariya, NITI AayogThe National Institution for Transforming India (NITI) Aayog vice-chairman Arvind Panagariya told The Financial Express there is room for a larger dose of interest rate cuts now. (PTI)

While the market is expecting a cut in the interest rates by the Reserve Bank of India (RBI) soon with the monsoon situation improving and rainfall during the period June 1-25 at 28% above the long period average, the pressure on the apex bank from the government for the cut to be deeper than 25 basis points, is growing.

The National Institution for Transforming India (NITI) Aayog vice-chairman Arvind Panagariya told The Financial Express there is room for a larger dose of interest rate cuts now.

“We have seen nearly five percentage points cut in the inflation rate recently. This has been accompanied by three cuts of 25 basis points each in the repo rate with transmission of some 30 to 40 basis points cut in the actual lending rates,” he pointed out.

Panagariya added: “Given these relative movements in the inflation and interest rates and the monsoon looking a lot better than it did in the beginning of June, I do see room for further cuts in the interest rates. I am inclined to believe that the RBI recognizes these factors as well and will bring good news to borrowers, possibly in a larger dose than has been the case so far.”

The CPI inflation has come down from 8.2% in March 2014 to 5.01% in May 2015 and the WPI inflation has dropped from 6% to -2.36% in the same period.

Experts believe that the RBI now can look at cutting the repo rates by 100-150 basis points going ahead.

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