ET NowET Now caught up with C Rangarajan, Former Chairman, PMEAC, for his views on the rate cut. Excerpt:
ET Now: Are you surprised about the timing of this rate cut?
C Rangarajan: I have been surprised by the timing. I thought it would come probably at the usual bi-monthly policy statement in April.
One reason behind the cut could be the infltion rate that is well under control. But I do not necessarily think that the Budget as such has done anything to decrease the pressure on inflation.
The fiscal deficit continues to remain high. The service tax increase may also have an impact on prices. Going ahead, the oil prices may not fall and may in fact harden a bit. But given the current situation — the benign WPI and CPI indiators — there seems to a case for reduction in rates.
ET Now: On March 2, Governor Rajan had said there was no case for the RBI to cut rates. But two days later he goes in for a rate cut. Does that in any way damage the RBI's credibility?
C Rangarajan: The perception of the Reserve Bank after taking the Budget into the account might have changed. I don't know the internal dynamics, but the point is that as such I am not in disagreement with this rate action.
This could have been done even in the earlier policy statement. But certainly he could have waited till the April policy as well. As I have already mentioned, the Budget was not a big help.
ET Now: Are you surprised about the timing of this rate cut?
C Rangarajan: I have been surprised by the timing. I thought it would come probably at the usual bi-monthly policy statement in April.
One reason behind the cut could be the infltion rate that is well under control. But I do not necessarily think that the Budget as such has done anything to decrease the pressure on inflation.
The fiscal deficit continues to remain high. The service tax increase may also have an impact on prices. Going ahead, the oil prices may not fall and may in fact harden a bit. But given the current situation — the benign WPI and CPI indiators — there seems to a case for reduction in rates.
ET Now: On March 2, Governor Rajan had said there was no case for the RBI to cut rates. But two days later he goes in for a rate cut. Does that in any way damage the RBI's credibility?
C Rangarajan: The perception of the Reserve Bank after taking the Budget into the account might have changed. I don't know the internal dynamics, but the point is that as such I am not in disagreement with this rate action.
This could have been done even in the earlier policy statement. But certainly he could have waited till the April policy as well. As I have already mentioned, the Budget was not a big help.
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