RBI rate cut will hinge on inflation, says Rangarajan

K. R. Srivats New Delhi | Updated on March 12, 2018 Published on July 09, 2012

The Chairman, Economic Advisory Council to Prime Minister,Dr C. Rangarajan (left), with the Minister for Housing andPoverty Alleviation, Ms Kumari Selja, and the Minister ofState for Finance, Mr Namo Narain Meena, at the silverjubilee celebrations of National Housing Bank in the Capital onMonday. — Ramesh Sharma

rangarajan   -  Business Line


The Reserve Bank of India (RBI) will get some room to ease monetary policy if non-food manufacturing inflation shows signs of decline, Dr C. Rangarajan, Chairman, Prime Minister’s Economic Advisory Council (PMEAC), has said.

Expectations are high that the RBI will opt for a policy tilt (at least a 25 basis point cut) on July 31 to revive sagging economic growth.

The RBI had preferred to play down the growth concerns in its last policy review in June and chose to maintain status quo.

“I believe if the inflation rate, particularly non-food manufacturing inflation, shows signs of decline, then there will be scope for the RBI to adopt an easier stance,” Dr Rangarajan said on the sidelines of a National Housing Bank (NHB) event here on Monday.

He was responding to a query from Business Line on whether he sees RBI cutting policy rates on July 31 in the wake of expansionary monetary policies pursued by major central banks abroad.

While the European and Chinese central banks opted to ease rates further, the Bank of England had, on July 5, decided to provide monetary stimuli worth £50 billion.

Dr Rangarajan pointed out that the situation in India was somewhat different from the one in other countries. “In other countries, the growth rate is low, but at the same time inflation is also low. Whereas in our country, while growth is slowing, inflation remains at a high level,” he said.

In India, core inflation has been below the 5 per cent level in the past three months. However, headline inflation has shown a rising trend. The headline inflation based on wholesale price index stood at 7.55 per cent in May, up from 7.23 per cent in April this year.

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Published on July 09, 2012
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