Case for more rate cut by Reserve Bank of India as inflation low: ADB

NEW DELHI: ADB today made a case for further lowering of interest rate by the Reserve Bank of India saying the key policy rate is not "excessively low" and can be brought down if inflation is lower.

"7.25 per cent (policy repo rate) is still not excessively low... If inflation rate is lower, of course interest rate can come down," Asian Development Bank President Takehiko Nakao said here.

However, he added immediately that he does not want to "predict monetary policy of India".

The Wholesale Price Index (WPI) based inflation is in the negative zone for past seven month. It was (-)2.36 per cent in May. Similarly, the retail inflation is about 5 per cent.

RBI has cut interest rate by 0.75 per cent in three tranches beginning January 2015 in view of falling inflation.

However, industry is pressing for more reduction to spur economic activities.

The central bank is scheduled to announce third bi-monthly monetary policy on August 4.

The Manila-headquartered ADB, which provides soft credit to India for developmental projects, had projected a growth rate of 7.8 per cent for the current financial year and will come out with an update next month.

The multilateral agency proposes to increase lending to India by almost 50 per cent in three years to USD 12 billion by 2018.