Investors can now pay less interest on their investment in wake to store savings as the Reserve Bank of India (RBI) is likely to decline the interest rates on Monday, giving a relief from high inflation indicating with economical withdrawal symptoms with long term destruction.
Source said, RBI planed to unchanged policy rates in June, but due to having worse global market situation, it has to change its decision to balance the economy.
Earlier in April, RBI cut by 50 basis points to 8 percent and that give outcome with a little breathe in economic growth as compare to the current quarter.
The major warning to take immediate action in regard sloping economy that high the inflation, Standard & Poor’s analyst also warned that India could be the first BRIC nation to lose its investment-level credit rating.
Major cause is of weak fiscal deficit with political reforms that left no option with Indian economy at time of the euro zone crisis.
As per May Industrial data, inflation hiked to 7.55 percent, and for govt. it is difficult to reduce the rates. Leaving no option, RBI Governor Duvvuri Subbarao expects to cut rates and possibly banks’ required cash reserves, reports suggested.
“The RBI can easily justify lowering rates despite high headline inflation, as growth is below potential and therefore disinflationary,” an economist told reporters while asking about India’s economy.
RBI’s move is forwarding step to boost demand via interest-rate cuts instead of increasing supply that just hike inflationary pressures, but there are different opinion among Investors and companies that expected much high from banks.
Source reported, 90% of the people expect a repo rate cut of 25 bps, while 40% expect a CRR cut. There are also 30% who expect both ” a CRR cut as well as a small repo rate cut”.
Therefore, for govt. much toughest time to screening market, demand and expectation as per growth policies, because cut rates is not the only solution for removal the inflation, deeper structural reforms are needed much soon.
