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Economists want RBI to cut rates by 25 bps

Express rate cut is essential to boost slowing economy, India Inc sings the same tune

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In a pre-policy consultation meeting with the of India (RBI) today, several have opined that there should be a 25 basis points (bps) cut in repo rate in the forthcoming meeting next week.

"A majority of the economists were of the view that there should be a cut in repo rate by 25 bps in the upcoming credit policy review," sources said.

At the meeting called by the to elicit views of economists before the Annual Monetary Policy meeting for 2012-13 scheduled on April 17, economists conveyed that a was essential to boost a slowing economy.

The meeting was attended by RBI governors and deputy governors.

The central bank, which had raised key policy rates 13 times during March, 2010 to October, 2011 to contain rising inflation, had kept interest rates unchanged since its December policy review.

High interest rates impacted the investments and the economic growth which fell to a low of 6.9%, the worst since the crisis year of 2008-09.

Industry has also been demanding that RBI should cut rates in order to boost factory output.

Besides, heads of commercial banks have also urged the RBI to cut the cash reserve ratio (CRR) by 0.75%, along with a 0.25% reduction in the repo rate in order to ease a tight liquidity situation.

Currently the repo rate, which is the rate at which banks borrow from RBI, stands at 8.5%. CRR, which is the percentage of deposits banks have to park with the apex bank, is at 4.75%.

The RBI had earlier met industry chambers and Indian Bank Association (IBA). The governor is scheduled to meet the Technical Advisory Committee on Monetary Policy tomorrow.

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