More rate cut by RBI unlikely this fiscal: India Ratings
There is no scope for further reduction in policy rates by RBI in the current fiscal as the central bank focuses on transmission of rate cuts made so far, rating agency India Ratings & Research said today.
“Although Ind-Ra believes RBI’s policy stance will continue to be accommodative in the near term, there is no scope for further rate cuts in 2015-16.
“If conditions permit, there may be rate cuts in 2016-17. The current focus of RBI is to work with the government to clear the impediments for the better transmission of the policy rate cuts made so far,” Ind-Ra said in the note.
Since January 2015, RBI has cut key policy rates by a cumulative 1.25 percentage points (125 basis points).
On price rise, Ind-Ra said that retail inflation has risen significantly due to waning base effect since September. The consumer price index based inflation hit a 14-month high of 5.41 per cent in November. Wholesale inflation, however, remained negative at (-) 1.99 per cent in the month.
The deflationary trend in “wholesale price index (WPI) based inflation will also turn into inflation” in the early 2016, the agency said.
RBI keeps a close watch on retail inflation movements to decide on its monetary policy.
Ind-Ra said pulses and onion are the two food items that have spoiled the party lately.
While the prices of pulses rose by 58.2 per cent in November 2015, those of onion shot up by 52.7 per cent. A higher acreage under pulses during the 2015 kharif season was likely to cool prices post-harvest, it said.
A crackdown on hording and import have only marginally impacted pulses inflation so far.
“As rabi sowing is lagging behind the schedule, Ind-Ra believes there will not be much respite from the high prices of pulses anytime soon,” the report added.
On the deflationary trend in manufactured products, it said the sustained deflation suggests weak demand conditions in the economy. It also expects deflation in fuel prices to continue.
“The fresh weakness in global crude prices is likely to keep fuel prices in the deflationary mode for a longer period than earlier expected,” it added further.
Read full article: Financial Express
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