With global crude oil prices falling and inflation showing some signs off easing, the Reserve Bank of India (RBI) could have some room to reduce policy rates, Subir Gokarn, deputy governor, RBI, said on Monday.
“The growth is somewhat lower than expectations and that may have positive, moderating impact on core inflation,” said Gokarn. “Oil prices (too) have come off somewhat more than expected. Those are the two factors that suggest more room (for monetary policy) easing.”
The economy recorded a nine-year low growth at 5.3% in the January-March quarter. The RBI had maintained a high-interest rate stance as the headline inflation of India remained high. After a gap of 20-months, the central bank slashed key lending rates in April by 0.5% during its annual policy announcement. At that time, the RBI had said that there was limited room for a further rate cut. However, Gokarn’s comment comes amidst a depreciating rupee and a slower-than-expected growth rate of the country.
The RBI is expected to announce its mid-quarterly policy review on June 18. Lower-than-expected economic growth would have some bearing on RBI’s GDP growth projection for 2012-13, said Gokarn.
However, some industry experts denied a possibility in rate cut.
The RBI would only look at the inflation figures and if it dips further then only there are chances of a rate cut, said a senior banker.