PTI
New Delhi
RBI Governor Raghuram Rajan may budge to government and industry pressure to cut interest rate with a view to spur economic recovery and mitigate the impact of slowing China on India. Most of the bankers feel that benign inflation and status quo by US Fed has given room for the RBI to cut short-term lending (repo) rate by at least 0.25 per cent to 7 per cent.
Last week, Finance Minister Jaitley also asserted inflation to be very much under control and the country is better prepared than most emerging economies to weather global economic turbulence.
India's Wholesale Price Index (WPI) remained in negative territory for 10 months in a row, at (-)4.95 per cent, while the retail inflation (CPI) eased to a record low of 3.66 per cent in August.
Global turmoil, in the recent past has dominantly been triggered by the devaluation of Yuan and reports of slowing growth in China.
The banking fraternity in the country is also optimistic of a prospective rate cut on Tuesday. Eminent leaders like SBI Chairperson Arundhati Bhattacharya, HSBC India Head Naina Lal Kidwai and Union Bank's CMD Arun Tiwari have sighted the possibility of a 0.25 per cent (25 bps) rate cut by a rather cautious Rajan. Tiwari however maintained that SLR and CRR will be unchanged as liquidity is enough currently.
Earlier this month, the Fed heeded to calls from the World Bank and IMF by deciding not to go for first rate increase in almost a decade, stemming outflows from emerging economies.
The RBI has cut interest rates by 0.75 per cent in three equal tranches so far this year, but maintained status quo in its last monetary policy review on August 4.
NITI Aayog's (National Institution for Transforming India) VC, Arvind Panagariya also said that time is ripe for a 0.5 per cent to 1 per cent cut in interest rate by the RBI.
