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Inflation, factory output data warrant monetary easing in 2015: Experts

HSBC expects 50 bps in rate cuts in 2015

Press Trust of India  |  New Delhi 

Both and factory output data reinforce the case for monetary easing this year and the Reserve Bank of India may go for a policy rate cut before the February budget, say experts.

"Both and growth data reinforce the case for monetary easing this year. We expect 50 bps in rate cuts in 2015," Chief India Economist Pranjul Bhandari said.

Echoing sentiments, Citigroup India Economist Rohini Malkani said the latest data and benign outlook strengthens the case for monetary easing, adding that "we reiterate our view that the normalisation in could result in rates being eased by 100bps by FY16."

"Given current growth-dynamics and RBI's December policy statement of the possibility of acting outside the policy review cycle, we wouldn't be surprised if it does cut before the February budget," Malkani said.

RBI Governor during the last monetary policy review in December 2014 kept unchanged, saying that a shift in stance is 'premature' but hinted that a cut may come in early 2015 if continues to ease and government acts on the fiscal side.

RBI is scheduled to announce its sixth bi-monthly monetary policy on February 3.

According to official figures, industrial production grew at five-month high of 3.8 per cent in November last year, while retail inched up to 5 per cent in December.

According to HSBC, the CPI would average in the 5.5-6 per cent range in the first half of 2015. RBI's current target is 6 per cent CPI in January 2016.

Meanwhile a DBS in a research note further said that "overall, we expect the production trend to improve gradually. ... This should see GDP growth recover to 5.6 per cent in FY14/15 and accelerate to 6.1 per cent in FY15/16", the DBS report added.

First Published: Tue, January 13 2015. 17:16 IST