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Reuters
8 hours ago
- Business
- Reuters
India rate panel hopes to boost consumption, investment with large rate cut, minutes show
MUMBAI, June 20 (Reuters) - A big rate cut would assure stakeholders of India's focus on economic growth and aid in faster transmission while boosting investment and consumption, members of the monetary policy committee wrote in the June policy minutes published on Friday. Two weeks ago, the Reserve Bank of India cut its key repo rate by a larger-than-expected 50 basis points and slashed the reserve ratio for banks. It also changed its monetary policy stance to "neutral" from "accommodative", stating that room for further cuts was limited. "It is expected that the front-loaded rate action, along with certainty on the liquidity front, would send a clear signal to the economic agents, thereby supporting consumption and investment through lower cost of borrowing," RBI Governor Sanjay Malhotra wrote. All six members of the committee concurred that the fall in inflation in recent months had opened up policy space to support growth. However, only one of them - external member Saugata Bhattacharya - argued for pacing the rate cuts. "Continuing elevated uncertainty remains, to my mind, the primary reason to exercise caution in pacing monetary policy easing," wrote Bhattacharya, who voted for a 25-bp reduction. The RBI's assurance of continuing large durable liquidity support is likely to have a more dominant effect on further monetary transmission compared to a deep cut in the repo rate, he added. Retail inflation fell to 2.82% in May, the lowest in more than six years, staying below the central bank's 4% target for the fourth straight month as food prices eased. It is expected to largely remain subdued during the year. "..as monetary policy works with a lag, under the current circumstances, a 50-bp cut is preferable to two 25-bp cuts for faster and greater transmission," executive director and MPC member Rajiv Ranjan wrote in his minutes. Despite being one of the fastest-growing large economies, India can grow faster based on favourable demographics, conducive shift in regulatory policies, significant infrastructure enhancement, and leveraging on the macroeconomic stability achieved during the past decade, said RBI Deputy Governor Poonam Gupta, who was part of the MPC for the first time.
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Business Standard
30-04-2025
- Business
- Business Standard
RBI has room for more rate cuts, but with caution, says rate panel member
India has room for more rate cuts, given the declining inflation and elevated uncertainties around growth, but any further policy easing should be calibrated and done with caution, an external member of the country's rate-setting panel said late on Tuesday. "Going forward, continuing policy easing - both rate cuts and liquidity infusions - could eventually alter the growth-inflation balance, especially as growth recovery begins to approach potential levels, thereby increasing inflationary pressures," Saugata Bhattacharya said in an interview. "I think we are still some time away from this," Bhattacharya said. India's Monetary Policy Committee, which consists of three members of the Reserve Bank of India and three external members, cut the key repo rate by 25 basis points to 6 per cent earlier in April while changing the stance to "accommodative" from "neutral". This was the panel's second rate cut this year. The RBI also lowered its GDP growth estimate for the current fiscal year to 6.5 per cent from 6.7 per cent amid US tariff policy flip-flops, which have roiled financial markets. The central bank, under Governor Sanjay Malhotra, who took charge in December, has flooded India's banking system with liquidity with an aim to boost growth and ensure smooth transmission of policy rates. The RBI has infused liquidity worth Rs 6.21 trillion (about $73 billion) since the start of 2025. It plans to buy bonds worth Rs 1.25 trillion in May, which is expected to lower the cost of overnight interbank funds, effectively acting as a rate cut, according to analysts. This "proactive" infusion of cash is likely to assure markets that liquidity will be sufficient, Bhattacharya said. Surplus liquidity of around 1 per cent of overall deposits, perhaps even slightly higher, might be appropriate during the easing cycle, Bhattacharya said. "With fresh government spending, system liquidity might even - transitorily - exceed this (1 per cent) level and I am OK with that." Unlike interest rates, liquidity is easier to calibrate and reverse, if inflationary pressures build up, he said. Bhattacharya expects an "accelerated" transmission of rate cuts to consumers within the next two quarters as a majority of bank loans are linked to external benchmarks.
Time of India
30-04-2025
- Business
- Time of India
RBI has room for more rate cuts, but with caution, says rate panel member
India has room for more rate cuts, given the cooling inflation rate and elevated uncertainties around growth, but any further policy easing should be calibrated and done with caution, an external member of the country's rate-setting panel said late on Tuesday. #Pahalgam Terrorist Attack The groundwork before India mounts a strike at Pakistan India considers closing airspace to Pakistani carriers amid rising tensions Cold Start: India's answer to Pakistan's nuclear threats "Going forward, continuing policy easing - both rate cuts and liquidity infusions - could eventually alter the growth-inflation balance, especially as growth recovery begins to approach potential levels, thereby increasing inflationary pressures," Saugata Bhattacharya said in an interview. "I think we are still some time away from this," Bhattacharya said. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Join new Free to Play WWII MMO War Thunder War Thunder Play Now Undo India's Monetary Policy Committee, which consists of three members of the Reserve Bank of India and three external members, cut the key repo rate by 25 basis points to 6% earlier in April while changing the stance to "accommodative" from "neutral". This was the panel's second rate cut this year. The RBI also lowered its GDP growth estimate for the current fiscal year to 6.5% from 6.7% amid U.S. tariff policy flip-flops, which have roiled financial markets. Live Events The central bank, under Governor Sanjay Malhotra, who took charge in December, has flooded India's banking system with liquidity with an aim to boost growth and ensure smooth transmission of policy rates. The RBI has infused liquidity worth 6.21 trillion rupees (about $73 billion) since the start of 2025. It plans to buy bonds worth 1.25 trillion rupees in May, which is expected to lower the cost of overnight interbank funds, effectively acting as a rate cut, according to analysts. This "proactive" infusion of cash is likely to assure markets that liquidity will be sufficient, Bhattacharya said. Surplus liquidity of around 1% of overall deposits, perhaps even slightly higher, might be appropriate during the easing cycle, Bhattacharya said. "With fresh government spending, system liquidity might even - transitorily - exceed this (1%) level and I am OK with that." Unlike interest rates, liquidity is easier to calibrate and reverse, if inflationary pressures build up, he said. Bhattacharya expects an "accelerated" transmission of rate cuts to consumers within the next two quarters as a majority of bank loans are linked to external benchmarks.
Reuters
30-04-2025
- Business
- Reuters
India central bank has room for more rate cuts, but with caution, says rate panel member
MUMBAI, April 30 (Reuters) - India has room for more rate cuts, given the declining inflation and elevated uncertainties around growth, but any further policy easing should be calibrated and done with caution, an external member of the country's rate-setting panel said late on Tuesday. "Going forward, continuing policy easing – both rate cuts and liquidity infusions – could eventually alter the growth-inflation balance, especially as growth recovery begins to approach potential levels, thereby increasing inflationary pressures," Saugata Bhattacharya said in an interview. "I think we are still some time away from this," Bhattacharya said. India's Monetary Policy Committee, which consists of three members of the Reserve Bank of India and three external members, cut the key repo rate by 25 basis points to 6% earlier in April while changing the stance to "accommodative" from "neutral". This was the panel's second rate cut this year. The RBI also lowered its GDP growth estimate for the current fiscal year to 6.5% from 6.7% amid U.S. tariff policy flip-flops, which have roiled financial markets. The central bank, under Governor Sanjay Malhotra, who took charge in December, has flooded India's banking system with liquidity with an aim to boost growth and ensure smooth transmission of policy rates. The RBI has infused liquidity worth 6.21 trillion rupees (about $73 billion) since the start of 2025. It plans to buy bonds worth 1.25 trillion rupees in May, which is expected to lower the cost of overnight interbank funds, effectively acting as a rate cut, according to analysts. This "proactive" infusion of cash is likely to assure markets that liquidity will be sufficient, Bhattacharya said. Surplus liquidity of around 1% of overall deposits, perhaps even slightly higher, might be appropriate during the easing cycle, Bhattacharya said. "With fresh government spending, system liquidity might even – transitorily – exceed this (1%) level and I am OK with that." Unlike interest rates, liquidity is easier to calibrate and reverse, if inflationary pressures build up, he said. Bhattacharya expects an "accelerated" transmission of rate cuts to consumers within the next two quarters as a majority of bank loans are linked to external benchmarks. ($1 = 85.1270 Indian rupees)
