Arvind Mayaram bats for interest rate cut

Finance Secretary Arvind Mayaram, a day ahead of the Reserve Bank of India’s (RBI) fourth bimonthly policy review has batted for an interest rates cut, saying that the economic conditions were becoming favourable for a more benign monetary policy going forward in this year.

Mayaram opined that the wholesale price (WPI) inflation is at the lowest level since October, 2009 and retail inflation (CPI) is less than 8 percent which is the target for this year by an RBI panel report. However, RBI governor had earlier stated that the real problem is inflation that is persistent. “We have been emphasising again and again in order to break the back of inflation, we got to break this persistence. Once we do it, we can then be much more comfortable”.

Although, the RBI left key interest rates unchanged in its third bi-monthly monetary policy review early August, saying near-term tightening is not expected if inflation continues to ease and is highly unlikely that at its fourth bimonthly policy review the apex bank will cut interest rates, with still persisting high inflation. RBI has set a target for CPI inflation at 8 per cent by January 15 and 6 per cent by January 2016 and the CPI based retail inflation eased to 7.8 per cent in August.

The Finance Secretary while exuding confidence that Indian economy will clock a growth rate in the range of 5.7 to 5.9 percent during the current fiscal year 2014-15, said that Current Account Deficit(CAD) has been brought down substantially and this has also been acknowledged as of the key credit strength by S&P in its recent report.