Scope For RBI To Cut Rates On Lower Inflation, Crude Oil Prices: CEA Krishnamurthy Subramanian

The Reserve Bank of India should consider aspects such as moderation in inflation and the decline in crude oil prices as they provide a scope to cut interest rates, Chief Economic Adviser Krishnamurthy Subramanian said on Friday.

Responding to a query if RBI should announce surprise rate cuts like other global central banks, Subramanian said, “this is something that is being thought through.”

“Other central banks have certainly responded and inflation data clearly suggests moderation...expect core inflation to go down further because of decline in oil prices, so I think there is scope for the central bank to consider these different aspects,” Subramanian said.

India’s retail inflation eased for the first time in seven months to 6.58 percent in February from 7.59 percent in January.

The Bank of England reduced interest rates by 50 basis points to limit the economic impact of coronavirus. U.S. Federal Reserve had announced a similar cut last week.

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The government is watching, and tracking the data very carefully, Subramanian said. “The government and RBI will take all steps necessary.”

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Subramanian said the sectors that will be impacted due to the spread of coronavirus are tourism, hotels, restaurants, movies, and the government will continue to monitor them. “These are to be watched very carefully given the lockdown that is going on.”

The seventh bimonthly Monetary Policy Committee meeting is scheduled for March 31 to April 3.