Market seeks repo rate cut as inflation softens

Having declined for three months in a row, industrial production expanded by 0.1% in January even as manufacturing woes continue

At a pre-monetary policy meeting with Reserve Bank of India (RBI) officials on Tuesday, market representatives expressed concern on the slowing economic growth and suggested the regulator cut the repo rate.

Participants at the meeting included representatives from the Fixed Income Money Market and Derivatives Association of India, Primary Dealers’ Association of India, Foreign Exchange Dealers’ Association of India, Micro Finance Institutions Network  and Association of Mutual Funds of India.

At the meeting, the economic environment and its impact on various financial markets, including bonds, was also discussed.

After declining for three consecutive months, industrial production rose 0.1 per cent in January, even as manufacturing woes continued, official data showed. In February, Consumer Price Index (CPI)-based inflation eased to a 25-month-low of 8.1 per cent year-on-year, against 8.79 percent in January. Compared to Wholesale Price Index-based inflation, the central bank is focusing more on retail inflation, as recommended by the Urjit Patel committee set up to strengthen the monetary framework.

It is expected for 2013-14, the microfinance sector, excluding that in Andhra Pradesh, will record growth of 50 per cent. At the meeting on Tuesday, representatives from the sector said a report by a panel headed by RBI board member Nachiket Mor should be the basis for guidelines in the sector, not the Y H Malegam committee report. There were demands the loan limit in this segment be raised to Rs 1 lakh to further open the sector to more products and services. The issue of giving MFIN the status of a self-regulatory organisation was also brought up, said an executive.