Pressure On RBI to Cut Rates; Inflation is not a Top Concern: Government
Aug 04, 2015: Inflation cannot be a top concern according to the government that looks to cut in policy rates to push the economy. RBI is going to review its Monetary Policy today.
"When crude prices are down, WPI (wholesale price index) is in negative zone, monsoon good and a possibility of a bumper crop, inflation can't be primary concern,"a finance ministry source said. It shows government feel to cut interest rates.
"The Reserve Bank of India could deliver fireworks in its monetary policy meeting Tuesday by cutting the repo rate by 25 basis points to 7 percent," Moody's Analytics said on Monday.
"Notwithstanding the persistence of strong El Nino conditions, the southwest monsoon in India has progressed reasonably well so far," as per the report by Citi.
There has been a slight depreciation of the rupee. However, India's crude import cost has come down which is a positive sign as far as economy is concerned..
Due to fall in overall commodity prices, companies are being helped in cutting the input costs for companies that in return have reduced the pressure to raise prices.
Wholesale inflation has been in the negative zone for the last seven months.
"If rains remain non-disruptive, space for a final 25 basis points rate cut could open, but not more unless structural reforms pick up," HSBC said in a note.