Rajan's rate moves unlikely to lead to any disappointment: Nilesh Shah, MD, Kotak AMC

In a chat with ET Now, Nilesh Shah, MD, Kotak AMC, talks about RBI's latest policy. Excerpts:

ET Now: In April 2012, Dr Subbarao had also front-ended a rate cut on the premise that the government would show some fiscal prudence. But the government did not, and we saw inflation take off. Likewise Rajan front-ended a cut, and now we have the pay commission coming. Are we in line for disappointment again?

Nilesh Shah: There is a good chance this time around that inflation may not go up as much as expected. Besides, the pay panel award may have already been priced in by the markets.

This is primarily happening because our capacity utilisation — as mentioned by Governor Rajan himself — is probably about 65% to 68%, which is reasonably well below the true potential.

The September GDP growth number at 7.4% is also well below our potential.