Rate cut : Govt hopes RBI may vote for growth

Rate cut : Govt hopes RBI may vote for growth
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Analysts hope apex bank to do a trade off with growth, at least a 0.25% cut in the short-term lending rate in...

Analysts hope apex bank to do a trade off with growth, at least a 0.25% cut in the short-term lending rate in its policy reviewA

rate2New Delhi (PTI): With inflation in manufactured items showing signs of decline, the Finance Ministry on Thursday expressed the hope that RBI will reduce key interest rate in its monetary policy review next week.A "We believe that the RBI will do a comprehensive and nuanced analysis of the economy and take the right decision and we hope it will vote for growth. I am happy with what he (RBI Governor D Subbarao) has said," Department of Economic Affairs Secretary Arvind Mayaram said.

Industry is demanding a cut in repo rate to help revive India's sagging GDP growth that hit decade's low of 4.5 per cent in the third quarter of 2012-13. The Secretary said the rise in Wholesale Price Index (WPI) based inflation is largely due to food inflation.A "But if you remove the element of food from the calculation, then actually it has come down," Mayaram added. He, however, said food inflation is "worrisome" and it is necessary to look at it.

As per the WPI data, inflation in manufactured goods has moderated to 4.51 per cent in February against 5.82 per cent in the same month last year.A In his address at London School of Economics on Wednesday, Subbarao had said that there "has been some very welcome, although much delayed, action on correcting both the CAD and the fiscal deficit over the last six months".

"More notably, the recent budget has firmly embraced fiscal responsibility by restraining the fiscal deficit next year consistent with the road map recommended by the Kelkar Committee," he had said.A Most analysts are expecting the RBI to do a trade off with growth with at least a 0.25 per cent cut in the short-term lending rate in the March 19 policy meet.

Meanwhile, the Government has constituted a four-member committee headed by Economic Affairs Secretary, Arvind Mayaram for giving clear definitions to FDI and FII, with an aim to remove ambiguity over the two types of foreign investments. The DIPP Secretary, an RBI Deputy Governor and a SEBI Whole-time Member are the other members of the "high power committee".

It will take about two-and-a-half months to come out with the report, Mayaram said adding, "There is a lot of confusion in mind of foreign investors because there is no distinction between FDI and FII. The committee has been constituted on pursuant to the budget announcements by the Finance Minister. It will simplify definition, what constitute FII and what constitute FDI.

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