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Low inflation, falling economic growth leave more room for rate cut: Shaktikanta Das
Sep-20-2019

Amid gross domestic product (GDP) growth slipped to a six-year low of 5% in Q1FY20, Governor of the Reserve Bank of India (RBI) -- Shaktikanta Das stated that the government has limited fiscal space to economic growth, but low inflation can help the monetary authority ease policy rates further and help boost the economy that has badly lost its momentum. He mentioned that government measures to boost growth are more on the administrative side and it has been fiscally prudent in its moves, adding there can be more such off-balance- sheet measures from government in the offing.

The Governor said ‘today, when we see that the price stability is maintained and inflation is much below 4 percent and is expected to be so in the next 12 months horizon, there's room for (more) rate cuts, especially when growth has slowed down.’ However, he also mentioned within this policy framework, the MPC will consider these aspects as well as several other factors and the final decision will be taken in the ensuing MPC meetings in October 4.

Besides, talking about recent issues on the oil front, especially after the drone attacks on the largest Saudi Arabian facility and resultant drop in capacity by a tenth, he said it will not have a negative effect either on the domestic situation, including the fiscal balances or inflation as well. It is possible to contain the impact on the fiscal math as most fuel prices are now linked to market prices, thus capping the fiscal burden to the minimum.

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