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Letter to BS: It's better to wait and watch for RBI's next move

All the previous repo rate cuts by the RBI have failed

Reserve Bank of India | Coronavirus | repo rate

Business Standard 


This refers to the article “India’s business outlook worsening, RBI may cut rates again: Reuters poll” (July 29). The suggestions made by the economists in the poll that the (RBI) would be prompted to cut interest rates again as the outlook for India’s reeling economy has worsened because business activities slowed down as Covid-19 infections soared, should serve as a wake-up call for those in power. This view gains more prominence as its latest findings echo the recent criticism of New Delhi’s $266-billion economic rescue package, which does not include new spending, tax breaks or cash support. Moreover, with India now achieving the dubious distinction of being the third worst-hit country by infections after the United States and Brazil, the economy is doomed to experience more growth-linked contractions.

All the previous cuts by the RBI have failed. Since there has been no perceptible change in the attitude and approach of the nation's banking sector towards its growth-centric moves, one fails to comprehend the rationale behind the central bank still toying with the idea. Media is currently agog with reports indicating that its six-member Monetary Policy Committee may soon undergo some key structural changes. Who knows, the newly constituted committee may toe an entirely different line on this front. It’s better to wait and watch.

S Kumar New Delhi

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First Published: Fri, July 31 2020. 01:00 IST