The RBI's announcement of a 50 basis points rate cut is significant as the central bank has also signalled that its stance is going to be accommodative in the future, Chief Economic Adviser Arvind Subramanian has said.
"It gives us a lot of reason to hope that the economy is going to get all the support it needs (from the RBI)," Subramanian told the media at an event organised by industry body CII on Tuesday.
The CEA was answering questions on the central bank's decision to pare repo rates by 50 bps to 6.75 per cent from 7.25 per cent. This is the second rate cut this fiscal and the fourth rate cut in the calendar year.
Responding to a query on whether the rate cut could act as a dampner to small savings which has been declining over the years, Subramanian said the matter had to be reviewed.
"We are going to review that in the broader context to see what are the rates and who is benefitting.There is going to be a proper review of that. It is too early to pre-judge that exercise," he said.
On whether the forecast of 8 per cent growth in the GDP would be maintained, the CEA said that it, too, would be reviewed once more data came in.
Inflationary pressures under control
The rate cut showed that inflationary pressures are under control, Subramanian said, adding that it had opened up room for a monetary policy support for the economy. "Now we are looking for transmission of these policy cuts to broader rate cuts. And, the FM also indicated that to facilitate that we will be looking at all that is to be done, including reviewing other policies to facilitate transmission of these rate cuts," he said.
This will boost confidence, investments and bring down other market rates as well, which, combined with other on-going efforts of the government, should help in making the economy realise its longer term growth potential, he added.