See price trend before cutting rates: Rangarajan to RBI
The monetary policy had played a role in keeping price level well anchored but price trends have to be well established before reducing interest rates, Rangarajan said at a FICCI conference.
By PTI |
MUMBAI: The Reserve Bank should wait for a clear trend on easing price situation before taking any decision on interest rates cut, C Rangarajan, Chairman of the Prime Ministers's Economic Advisory Council, on Wednesday said.
The monetary policy had played a role in keeping price level well anchored but price trends have to be well established before reducing interest rates, Rangarajan said at a FICCI conference here.
"It is good that the year-on-year inflation is below four per cent but we also need to watch how the prices behave during the year and therefore monetary policy changes have to come after a clear trend has been well established," he said.
Inflation has fallen to 3.79 per cent for the week ended August 25 from a peak of 6.69 per cent early this year, raising expectations that the RBI may cut interest rates.
Rangarajan's comments came even as official figures showed that the country's industrial production growth grew at 7.1 per cent in July from 13.2 per cent a year ago, largely due to a slow down in manufacturing sector that faced the brunt of interest rate hikes in the past few months.
The former RBI governor also said he expected the GDP growth rate for the year to be about nine per cent.
"For the year as a whole, the growth rate would be maintained...there could be some special features...I have not yet analysed it. But overall the growth rate of the economy during the year will be about nine per cent," he said.
The economy grew by 9.3 per cent in the first quarter of this fiscal and 9.4 per cent during 2006-07. Rangarajan's estimates are similar to Planning Commission deputy chairman Montek Singh Ahluwalia, who yesterday said the economy would expand by 8.5-9 per cent. Ahluwalia had also said inflation would remain around the current levels.
The monetary policy had played a role in keeping price level well anchored but price trends have to be well established before reducing interest rates, Rangarajan said at a FICCI conference here.
"It is good that the year-on-year inflation is below four per cent but we also need to watch how the prices behave during the year and therefore monetary policy changes have to come after a clear trend has been well established," he said.
Inflation has fallen to 3.79 per cent for the week ended August 25 from a peak of 6.69 per cent early this year, raising expectations that the RBI may cut interest rates.
Rangarajan's comments came even as official figures showed that the country's industrial production growth grew at 7.1 per cent in July from 13.2 per cent a year ago, largely due to a slow down in manufacturing sector that faced the brunt of interest rate hikes in the past few months.
The former RBI governor also said he expected the GDP growth rate for the year to be about nine per cent.
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"For the year as a whole, the growth rate would be maintained...there could be some special features...I have not yet analysed it. But overall the growth rate of the economy during the year will be about nine per cent," he said.
The economy grew by 9.3 per cent in the first quarter of this fiscal and 9.4 per cent during 2006-07. Rangarajan's estimates are similar to Planning Commission deputy chairman Montek Singh Ahluwalia, who yesterday said the economy would expand by 8.5-9 per cent. Ahluwalia had also said inflation would remain around the current levels.
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