Bloomberg News

Deloitte’s Chakravarty Says India May Not Cut Rates Before April

January 24, 2012

Jan. 24 (Bloomberg) -- Anis Chakravarty, an economist at Deloitte Haskins & Sells, comments on interest rates and inflation in India. The Reserve Bank of India today unexpectedly cut the amount of deposits lenders need to set aside as reserves, or the cash reserve ratio, to 5.5 percent from 6 percent. The decision was predicted by three of 21 economists in a Bloomberg News survey.

Chakravarty spoke in a phone interview from Mumbai.

“Taking into account the rupee depreciation of the past few months, we had reached a point where it was absolutely necessary to ease the liquidity situation. However, the governor has made it clear that rate cuts are not likely to come soon.

‘‘Food inflation being in the negative doesn’t necessarily mean that it’s coming down consistently. That is because the statistical base is high. On the other hand, there hasn’t been a sustained drop in the manufacturing index.

‘‘The numbers don’t give any comfort in showing that inflation has eased from a policy perspective.

‘‘We can establish a trend on inflation dropping only if we see lower numbers till March, making it easier for the central bank to reduce rates. So I wouldn’t expect cuts before the April policy decision.’’

--Editor: Abhay Singh

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net


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