Drawing parallel with China, Chief Economic Advisor (CEA) Arvind Subramanian pitched for rate cut by the Reserve Bank of India (RBI) in its upcoming monetary policy on June 2, 2015 to boost growth. Citing China's example, Subramanian said the country has been buying dollars to build reserves and cutting its interest rates aggressively to make its currency more competitive and promote growth.
Subramanian wants RBI to cut interest rates so as to help depreciate the domestic currency to make Indian exports competitive and aid Make in India campaign. The Reserve Bank is slated to announce its second bi-monthly policy on June 2 during which it will take a call on interest rate taking into account inflation and other economic parameter.
Further batting towards this, he pointed that while macro-economy had turned around it was fair to assume that the real economy was recovering. He asserted that another indicator that points towards economic recovery was indirect tax receipts, adding that the buoyancy in tax collections during April was indicative of GDP growth bettering to about 9% in the current fiscal, from 7.4% a year ago.
Pointing to the evidence of improving macro-economic situations, Arvind said the Current Account Deficit (CAD), which more than a year back was a big worry, would be now be less than 1% in the current fiscal and that prices of oil, which form about 79% of the country’s imports, are likely to remain in the comfort zone of $50-80 per barrel without 'wild swings'.
Moreover, CEA is also pinning hopes on adequate food grain stock helping to keep inflation under control in the event of below-normal monsoon as forecasted by Indian Meteorological Department (IMD).