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Central bank may further ease the rates by 50-75 basis in 2015: Experts

RBI has reduced the benchmark interest rate by 0.25 per cent on Wednesday

New Delhi: Welcoming RBI's surprise rate cut, top bankers and industrialists said the central bank may need to further ease the rates by 50-75 basis points this year to revive investments, especially in the infrastructure space. Some bankers also hoped that RBI may go for further easing in key policy rates during its scheduled policy review on April 7, as inflation remains low and the government has committed to continue the fiscal consolidation programme. Keki Mistry, Vice Chairman and CEO of housing finance major HDFC Ltd, said that RBI may cut the rates further by 50 basis points in 2015.

"The rate cut this morning was pretty much expected. At the start of 2015, we were expecting about a 100-bps reduction in interest rates in the course of the calendar year. Of that 100 bps, we have now seen 50 so far and I expect the balance 50 bps to happen during the remaining part of the year," Mistry added. He, however, said it was difficult to exactly time the rate cuts. L&T chief A M Naik also said that RBI's rate cut move was surprising in terms of timing, but he expects further 50 bps rate cut between April and July. Stating that just 50 basis points rate cut, announced so far in 2015, was not viable for most infrastructure projects to take off, Naik said he expects another 50 bps cut in interest rates in next 3-4 months.

Noted economist Jim Walker tweeted that another 50 basis points rate cut was required in April. HDFC Bank's Chief Economist Abheek Barua said there may be further 50-75 basis points rate cut in 2015. Minister of State for Finance Jayant Sinha also said that room for further easing of rates remains in place while today's rate cut decision of RBI should give a boost to the economy in the near term. The Reserve Bank today surprised markets by reducing the benchmark interest rate by 0.25 per cent to 7.5 per cent. This is the second time in two months that the RBI has cut interest rates outside the regular policy reviews. Last time on January 15, it had cut the repo rate by 0.25 per cent to 7.75 per cent. Notwithstanding the fact that the fiscal deficit is a little higher than what was originally expected, inflation expectations continue to remain low and therefore RBI appears to have been comfortable in terms of cutting rates.

Rolling out a new fiscal consolidation roadmap, Finance Minister Arun Jaitley had said in the Budget proposals last week that fiscal deficit would be brought down to 3.9 per cent of GDP in 2015-16, and to 3.6 per cent and finally to 3 per cent by 2016-17 and 2017-18.

( Source : PTI )
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