New Delhi: Extended pause in the policy rates of Reserve Bank of India seems certain at the policy review on June 3. Economists predict that RBI will leave interest rates (8%) unchanged as it waits for further proof that inflation is under control.
India’s economic growth stayed below 5 % for the second year in a row at 4.7% in 2013-14. Growth remained subdued at 4.6% in the fourth quarter.
Raghuram Rajan, Governor RBI, had kept the policy rate unchanged at 8% in its April 1 review as inflation, especially of food items, hovered at over 8%. Food inflation in April stood at 9.66% and retail inflation was at 8.59%.
While India’s high inflation rates have come down in recent months, the central bank is waiting to see if they will flare up again. Rajan may prefer containing stubborn inflation before conceding to demands for a rate cut to boost growth.
RBI Governor on Sunday met Prime Minister Narendra Modi ahead of monetary policy review. RBI’s bi-monthly policy review on Tuesday will be the first after Modi assumed office on May 26.
Known for the primacy he accords to controlling inflation, Rajan said the “government and the central bank have both stressed on the need to bring down inflation while respecting the fact that growth is very weak”.
Last week, Rajan had met Finance Minister Arun Jaitley and had said fighting price increase is a priority, stressing that the central bank has always maintained a balance between the need to check inflation and prop up growth.
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