The Reserve Bank of India (RBI) may cut rates early next year as price situation is showing “definite improvement”, former chairman of Prime Minister’s Economic Advisory Council C Rangarajan said. He, however, cautioned that volatility in the currency markets should also be taken into account before going for any policy decision.
Speaking to the mediapersons on the sidelines of the Xth International Conference on Information Systems Security (ICISS-2014) in Hyderabad, he said, “The price situation is showing definite improvement. The latest policy statement has clearly given indication if the price behaviour is along the trajectory envisage. I expect probably changes will come in the early part of next year. It could be any time.”
“But the only factor that has to be taken into account is the fact that there is great volatility in the foreign currency markets. And, therefore, the timing will also be influenced by what is happening in the foreign exchange markets,” Rangarajan said at the conference organised by the Institute for Development and Research in Banking Technology (IDRBT).
On the falling oil prices, he said net oil importing countries such as India will benefit in terms of reducing current account deficit (CAD). “If the situation continues, CAD will be in the range of 1.7% of GDP as that of last year,” he said, adding it might be even lower or same like last year.
