Time for monetary easing; RBI rate cut won't reverse inflation downtrend: Arvind Virmani

NEW DELHI: Stating that cutting interest rates will not reverse inflation downtrend, RBI Adviser Arvind Virmani on Thursday said, "Benchmark rate needs to be cut." "The Consumer Price Inflation (CPI) is firmly on a downtrend. It is time for monetary easing," Virmani said.

According to Virmani, there is 51% probability that CPI will be less than 7% by March. He is also of the opinion that the chances of meeting 4.1% fiscal deficit target have 'gone up'.

Last week, Virmani said that falling global crude prices would help government achieve fiscal deficit target. "However, the government needs to curb subsidies for containing the deficit in coming years," Virmani had said.

"There are huge gains from fall in crude oil prices and as inflation is also going down, it is going to have very positive effect (on reducing fiscal deficit)," Virmani had said at an event organised by FICCI.

"I don't think it is difficult to achieve 4.1 per cent fiscal deficit target but the government would need to curb the subsidies in the medium run," he had said.

For 2014-15, fiscal deficit - gap between government expenditure and revenue - has been pegged at Rs 5.31 lakh crore or 4.1 per cent of GDP.

Fiscal deficit has already touched 82.6 per cent of the Budget Estimates for 2014-15 to cross Rs 4.38 lakh crore at the end of September. During the same period of the 2013-14 fiscal, the deficit was at 76 per cent of the Budget Estimate.

(With inputs from PTI)