Strong revival in investment climate and growth expected in FY16: Rana Kapoor

RBI Governor Raghuram Rajan decided to not reduce the key interest rates in the central bank's monetary policy review.

Dec 02, 2014 02:12 IST India Infoline News Service

Contrary to the pressure from the government, technical advisory and the various other groups, RBI Governor Raghuram Rajan decided to not reduce the key interest rates in the central bank's monetary policy review. Retail inflation, as measured by the consumer price index (CPI), has decelerated sharply since the fourth bi-monthly statement of September. However, Dr. Rajan said that it would be premature to change the monetary policy at the current stage, yet hinted that if things progress as they are right now, early next year could see some rate cuts. 

Rana Kapoor, MD & CEO, YES BANK and President ASSOCHAM said regarding the development, "While the Reserve Bank of India has left policy rate unchanged in the fifth bi-monthly monetary policy; it has clearly opened the window for rate cuts to begin in the next review in Feb 2015 or possibly earlier. The sharp decline in global commodity prices especially crude along with moderation in domestic food prices have evolved as 'strong enablers' for a rate cut. Further, as government continues to remove supply bottlenecks and expedites pace of reforms post Budget, the RBI could complement Government's efforts by embarking on a rate easing cycle.

He added, "I am confident that this coordination between monetary and fiscal policy coupled with pragmatic economic governance will facilitate a strong revival in investment climate and growth in FY16. I see space for monetary accommodation to the tune of close to 100 bps cut over the course of next 12 months in FY2015-16."

India Inc was expecting at least 50 basis points cut in the benchmark interest rate at least this time around by the Reserve Bank of India when it takes into account falling inflation and a lower build- up of price rise, an ASSOCHAM survey had pointed out, ahead of the credit policy review on Tuesday. They pointed out that a rate cut will help in improving the investment climate, and lead to higher spending by the consumers

Related Story

Open Free Demat Account (Rs699)