RBI rules out the case of slashing interest rates in the near term: Raghuram Rajan

Right after the release of five year low August WPI data, Reserve Bank of India’s governor, Raghuram Rajan clearly ruled out the chances of rate cut at the month-end monetary policy announcement, citing that Inflation in Asia's third-largest economy, India, was still high and hence there was no point in slashing interest rates since this would further build on to inflationary pressures.

He further underscored that Reserve Bank of India would bring down interest rates as and when it is “feasible”. Also, the governor acknowledged that macro-indicators were improving, but highlighted that the economy still had some way before completely emerging out of woods.

Helped by slower annual rises in prices of fuel and clothes, retail inflation edged down marginally to 7.8% in August from 7.96% a month earlier. Meanwhile, extending its easing trend, India's main inflation gauge, based on monthly WPI, softened more than expected at 3.74% for the month of August, as compared to 5.19% (Provisional) for the previous month of July. Street widely was expecting a number above 4% for the month under review.

Besides, India’s central bank governor also emphasized upon the falling oil prices as a good opportunity to the country for scrapping diesel subsidies. Urging the government to seize the moment to eliminate diesel subsidies completely, the governor highlighted that lower oil price means a lower current account deficit, lower oil subsidies and lower inflation.