More room to cut rates, says Jalan

The Reserve Bank of India has room to cut benchmark interest rates further to boost economic growth, former Governor Bimal Jalan said.

India¿s central bank has reduced its benchmark policy rate six times since mid-October to a record low, predicting Asia¿s third-biggest economy will expand at the slowest pace in seven years. A new government that may be formed as early as next week after elections ended yesterday faces the task of reviving investment and demand amid the worst slump in factory output in 16 years.

“With inflation close to 1 percent and demand declining, there¿s scope for lowering interest rates,” Jalan, who headed the country’s monetary authority from 1997 to 2003, said in an interview in New Delhi on Thursday. “As of now, I don¿t see any problem should the Reserve Bank decide to do so.”

Inflation, measured by wholesale prices, stayed under 1 per cent for a ninth week through May 2, government data show. Gross domestic product expanded 5.3 per cent in the quarter through December, the slowest pace since 2003, following an average of almost 9 percent growth in the five years through March 2008. Industrial production shrank 2.3 perc ent in March from a year earlier, the worst performance since January 1993.