Top analysts react to RBI’s move on interest rate

The Reserve Bank, in a beyond-policy-meeting announcement on Thursday morning, cut key policy rate by 25 basis points from 8 per cent to 7.75 per cent. Reserve Bank Governor Raghuram Rajan in a statement said disinflationary developments along with the Government’s resolve to adhere to its fiscal deficit target provided headroom to cut rates. Some reactions to the Reserve Bank’s move on Thursday: Shashwat Sharma, Partner – Management Consulting at KPMG in India “Whilst there seems to be no structural changes in the Indian economy since the last monetary policy, considering the continued slide in oil prices, easing of inflation rate, momentum in industrial production and improving fiscal situation, the RBI has mustered courage to reduce the repo rates by 25 bps. This clearly indicates start of falling interest rates but the litmus test would be when the oil prices moves upwards from the current levels or inflation levels breach the comfort levels.” Dharamkirti, Chief Economist, Crisil Research “Thursday’s rate cut beyond the near-term – after a proportionate reduction in lending rates by most banks -- would hinge upon the risk aversion among banks because liquidity is expected to remain comfortable. That being the case, and considering that household inflationary expectations have eased to their lowest level since September 2009, the RBI’s move to cut rates is apt.” Anis Chakravarty, Senior Director, Deloitte in India.