Mumbai: Home loan borrowers and corporates will have to wait a month or more for interest rates to come down as the RBI is not convinced about the sustainability of the disinflationary process. Announcing his fifth bi-monthly monetary policy statement on Tuesday, RBI Governor Raghuram Rajan said inflation numbers were lower so far also because of the base effect.
The December inflation numbers will be more accurate as the base effect fades by then and if it’s lower, this could see a change in monetary policy stance early next year.He kept the key policy rates — repo rate and cash reserve ratio — unchanged at 8 per cent and 4 per cent respectively. Observing that weak demand and rapid pace of disinflation called for monetary accommodation, Dr Rajan said the fact that banks were slow to pass on the recent fall in money market rates suggests that reducing monetary policy rates would ‘primarily have a signaling effect for a while.”
Addressing a press conference after releasing the monetary policy, Dr Rajan refuted corporate India’s criticism that the RBI was not concerned about growth and called it “misconception and short-sightedness” on their part.He promised happy days for sustainable growth in the future, as “the fundamental way to get sustainable growth is to moderate inflation.
He said “savers see high inflation and producers see low inflation and say interest rates are high. The RBI is working on a framework to make growth possible, “Bear with us, and we will make growth sustainable,” he said.Lashing out at corporate India, he said there is confusion in their minds about rates. But they pay risk premium as they are leveraged and not repaying their loans.
“They should control their risk premiums.”On investment picking up, he said that it is being held back because of infrastructural constraints, lack of assured supply of key inputs like coal, power, land and minerals.
The success of government’s actions in these areas will be key to reviving growth and offsetting downside risks emanating from agriculture and exports.This will help retain the projected growth at 5.5 per cent in 2014-15 with a gradual pick-up of momentum through 2015-16.
