Amid confliction whether to hold the higher interest rates or cut them to decline inflationary crisis, the Reserve Bank Of India is under much pressure. On Monday, it said that the decision has come after reviewing the quarterly monetary policy on Tuesday, may be balanced the status quo on interest rates.
It expected that RBI will keep its rates unchanged, a much disappointment today for Industry honchos and bankers. The unchanged status is because price pressure like high domestic energy prices and rupee depreciation lead to hike inflation rate with slow growth economy.
“Monetary policy space needs to be created through fiscal adjustment and structural measures to improve supply conditions …” the Reserve Bank said a statement in its Macroeconomic and Monetary Developments report on Monday.
Reports said, Suppressed inflation, poor supply responses and a weaker monsoon are risks to price-situation. On movement of monsoon, the deficiencies by 21 percent can have an adverse impact on food inflation likely to impact kharif crops, especially coarse cereals and pulses.
Moreover, much positive impact of global crude oil prices along with gold imports lower the deficits, remain slowing global growth and trade elasticity may soon raise diesel prices to decline government borrowing burden.
RBI must slash interest rate to prop-up growth, Government should take action on fiscal deficit, remove FDI, and improve investment as increased risks on inflation scenario affect the economy.
Slow growth in the current fiscal is likely to be below 7.5 percent, growth will slip to 6.5 percent for the fiscal against RBI’s projection of 7.3 percent. However, in April, RBI cut rates by 50 basis points and followed in last June 16, it had refrained to cut policy rate.
