Rajan calls for rate cut

Rajan calls for rate cut
Highlights

Says it will take some time to get back to 9% growth trajectory New Delhi (PTI): Ahead of the annual...

Says it will take some time to get back to 9% growth trajectory

raj2New Delhi (PTI): Ahead of the annual monetary policy review of the RBI, chief economic advisor Raghuram Rajan on Friday said there is a scope for interest rate cut as the core inflation has come down and there is a need to push growth.

"The Rabi crop is likely to be good one. That will help bring inflation down. So as inflation comes down, there is a case for RBI to cut interest rate. I think, we have a case for stronger growth," Rajan said at an event here.

The RBI is slated to announce monetary policy for 2013-14 on May 3. Wholesale Price Index (WPI) for the month ended March moderated to three-year low of 5.96 per cent against Reserve Bank's projection of 6.8 per cent. In its last policy review in March, RBI slashed short-term lending rate by 0.25 per cent to 7.5 per cent.

Accordingly, the short-term borrowing rate came down to 6.5 per cent. However, the Cash Reserve Ratio was retained at 4 per cent on expectation that government will start spending more. India's economic growth has slowed to a decade low of 5 per cent in 2012-13. The third quarter of the financial year saw the growth plummeting to almost a four-year low of 4.5 per cent.

Replying to a query whether retrospective amendments create negative sentiment, Rajan said: "In general, the government should avoid doing retrospective amendments, which Parthasarthi Shome committee report has suggested."

Former finance minister Pranab Mukherjee in his 2012-13 budget has brought amendment to Income Tax Act, 1961 with retrospective effect to undo the Supreme Court judgement that was ruled in favour of Vodafone.

FICCI pitches for 1per cent rate cutA

New Delhi (PTI): Expressing concern over reluctance of banks to reduce interest rates, the Industry body FICCI on Friday called on RBI to cut the key rates at least by 100 basis points (1%) to boost manufacturing in the country. "This (earlier rate cut) has not yet translated into a reduction in lending rates by banks...There is a need for reduction in interest rates by about 100 basis points over the next 6 months," Ficci President Naina Lal Kidwai said.

Kidwai said the bank's lending rate has come down only to 9.7-10.25 per cent at present from 10-10.75 per cent in April last year, which is not tandem with the rate cuts announced by the RBI. During 2012-13, the Reserve Bank reduced key policy rate by 1 per cent to 7.50 per cent in three tranches to prop up sagging economic growth.

RBI is scheduled to announce annual monetary policy for 2013-14 on May 3. RBI, Kidwai further said, should take advantage of the falling value of gold and oil prices in the international market to promote low interest rate regime. She said that the present difficult economic situation demands focus on enabling the economy back to a high growth trajectory.

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