RBI Likely to Cut Rates from February 8 to Increase Demand after Cash Crunch

by Shobha February 1, 2017 0 Comment

From next week, RBI is anticipated to reduce interest rates which will in turn help revive demand according to a Reuter’s poll. Early in November, the Prime Minister of India, Mr. Narendra Modi took a surprising move by launching the demonetisation move in order to combat corruption and tax evasion.

The demonetisation move led to major disruptions in the Indian economy where half of India’s output depends on consumer spends. As a result of the move households, farmers as well as companies had to face a hard time to meet their needs.

Though it has been insisted by the government that impact on the economy will be temporary but independent estimates tell a different story where the impact is expected to be longer lasting and bigger. Because of that, India may lose its tag as the fastest growing economy in the world. The dread of a faster slowdown along with low inflation created loud calls for RBI to cut interest rates in December. However, the rates remained unchanged as RBI waited to understand the effects of demonetisation.

The recent 46 economists Reuter’s poll has predicted that RBI would cut benchmark repo rate by 6 percent on February.

On top of that, the central bank is also expected to cut another 25 basis points in July-September quarter which would take repo rate to 5.75%. In its latest report, the international monetary fund has cut the growth forecast of India for the present fiscal year to 6.6 percent.

RBI Likely to Cut Rates from February 8 to Increase Demand after Cash Crunch

Shobha

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RBI Likely to Cut Rates from February 8 to Increase Demand after Cash Crunch

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