New Delhi: Amid expectations of a 0.25 percent cut in interest rate to spur growth, RBI Governor Raghuram Rajan will tomorrow come out with the fourth bi-monthly monetary policy for the current fiscal.
While deciding on the key lending rate, he will have to take into account various factors including low inflation, sluggish industrial output, below normal monsoon and most significantly the recent decision of the US Federal Reserve to postpone interest rate hike.
The Reserve Bank Governor has been under pressure from the Finance Ministry as well as the industry to cut interest rate to spur economic recovery and mitigate the impact of slowing China on India.
Most bankers feel that benign inflation and status quo by US Fed have given room for the RBI to cut short-term lending (repo) rate by at least 0.25 percent to 7 percent.
Even Finance Minister Arun Jaitley last week asserted that common sense says the interest rates should come down.
Jaitley had said inflation is "very much under control" and the country is better prepared than most emerging economies to weather the global economic turbulence.
Global turmoil triggered by devaluation of yuan and reports of slowing growth in China has impacted Indian currency and stock markets.
As regards the price situation, the wholesale price index (WPI) remained in the negative territory for 10 months in a row and stood at (-)4.95 percent, while the retail inflation based on Consumer Price Index eased to a record low of 3.66 percent in August.
The first quarter GDP number of 7 percent was below the market expectation, while industrial output growth in April-July was 3.5 percent.
India Ratings and Research (Ind-Ra) said it expects the RBI to take a gradual route of repo rate moderation (by 0.25 percent to 7 percent) and sound cautious in its tone.
Major lenders like the State Bank of India also expect RBI to lower the repo rate.
