‘RBI will cut rate if it expects sub-6% inflation after that’
6 Aug 2015 6:07 AM IST
RBI Governor Raghuram Rajan on Wednesday said the central bank will cut interest rate provided it feels confident that inflation will remain below 6 <g data-gr-id="52">per cent</g> even after the reduction.
"We will cut rate when we see that even after the rate cut, inflation will remain below 6 <g data-gr-id="40">per cent</g>," Rajan said.
RBI expects retail inflation to be around 6.1 <g data-gr-id="32">per cent</g> in January-March, 2016.
"It should be <g data-gr-id="45">actually</g> below that. That is what we are looking for to see how much room we have (to cut rate)," Rajan told CNBC Awaaz.
RBI Tuesday maintained a status quo on policy <g data-gr-id="46">rate,</g> but promised that the central bank could consider a reduction in rate ahead of the September 29 policy, depending on <g data-gr-id="39">macro economic</g> data.
Since January, RBI has reduced key lending (repo) by a total of 0.75 <g data-gr-id="33">per cent</g> in three tranches.
He said there is <g data-gr-id="44">perception</g> among people that inflation is rising because of increase in prices of milk and vegetables, which is "worrying".
Retail inflation stood at an 8-month low of 5.4 <g data-gr-id="41">per cent</g> year-on-year in June compared with 5.01 per
cent in May. RBI tracks CPI, or retail inflation, in deciding its monetary policy action.
On the impact of a likely hike in interest rate by US Fed, Rajan said initially there could be volatility and flight of capital, but investors will return as prospects are good in India and it provides a "stable" investment option.
On growth prospects, Rajan said the current fiscal is expected to end with a growth rate of 7.6 <g data-gr-id="36">per cent</g>, which is a "strong growth".
Talking about the structure of the proposed monetary policy committee (MPC) and setting up of the Public Debt Management Agency (PDMA), Rajan said it would require legislative changes and could take years.
Rajan on Tuesday favoured doing away with the veto power of the central bank chief in deciding interest rate, arguing that it would be better for a committee to decide the key rate rather than one individual.
In Budget, the government had proposed to set up PDMA to manage government debt and also to shift the regulation of government bond from RBI to Sebi. However, due to opposition from RBI, the proposal could not go through.
Rewrite ‘poorly drafted’ cos Act, says new ICICI Bank Chairman M K Sharma
In a strong criticism of the “poorly- drafted” Companies Act, ICICI Bank’s newly appointed Chairman M K Sharma has said that tightening of norms has made it a “curse” to be a promoter and everyone is being made to pay because of a few cases like Satyam and Sahara.
Sharma said there is an urgent need to completely re-write the Act as it lays stress on regulations rather than playing a developmental role and it appears to have been written for lawyers and chartered accountants, rather than for companies. Talking about the enhanced compliance procedures, Sharma said it is a “curse” to be a promoter in the current <g data-gr-id="93">times,</g> while cap imposed on directorships has also increased the compliance requirements for individual board members. Sharma, who himself has been on various boards, said every document has to be read from cover to cover and called the scope for action against directors as a “frightening feature” given the fact that an audit committee on which the director may sit meets only five times a year.
“A law should not seek to regulate the black-sheep. You must deal with them through penal action. Just because one Satyam happened and one Sahara happened, everyone else has to play penalty for that,” he said while speaking to the audience at an event here.
Next Story
