Bloomberg News

Ambit’s Holland Says Lower Rates Alone Won’t Boost India Growth

June 18, 2012

Andrew Holland, chief executive officer at Ambit Capital Pvt., comments on the outlook for interest rates after the Reserve Bank of India unexpectedly kept rates unchanged today.

Governor Duvvuri Subbarao left the benchmark repurchase rate at 8 percent. The decision contrasts with rate cuts in Brazil and China in the past three weeks. The central bank’s next scheduled meeting is on July 31.

Holland spoke in a phone interview from Mumbai.

“The market was hoping for a rate cut given the slowing growth. But with inflation remaining high and the monsoon below expectations, the bank probably wants to keep the powder dry at the moment.

‘‘The move shows that it has thrown the ball back to the government to undo bottlenecks and go ahead with reforms. The RBI can’t do it all. Low interest rates cannot boost growth and you’ll have to only look at the European countries to see that. Growth needs confidence. And there’s no confidence right now.

‘‘It’s more likely than not that the RBI will cut rates in July. But a month is a long time. And if by then nothing’s really changed in terms of reforms and the monsoon is not very good, I would expect a rate cut of at least 0.25 percent.

‘‘Though I don’t think rate cuts alone will help growth. You can’t buy confidence with rate cuts.”

To contact the reporter on this story: Archana Chaudhary in New Delhi at achaudhary2@bloomberg.net

To contact the editor responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net


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