Arun Jaitley today pitched for easier monetary policy, arguing that
high interest rates can make the economy sluggish.Reserve Bank will
hold its first bi-monthly monetary policy review for 2016-17
tomorrow.The finance minister also stressed that the debate on
crucial economic issues, like interest rates, should move in the
right direction in India, which is a “large and noisy democracy”.
”There are a number of challenges in a large and noisy democracy and
the most important for institutions like government and industry is
to make sure that the debate on issues moves in the right direction”
,said Arun Jaitley,Finance Minister.
The outcome of the Reserve Bank of India’s ( RBI) monetary policy
will determine the direction of the markets in the days ahead. As
Dalal Street forecasts a 25-bps interest rate cut by the central bank
on Tuesday, markets could decline if the easing is just in line with
expectations or below. More importantly, investors will watch the
commentary to gain insights into future rate cuts and liquidity.
Once the action around the monetary policy subsides, investors
will shift focus to fourth quarter corporate results Benchmark
indices gained 6-7% in March partly on expectations of a rate cut
after the government maintained a stiff fiscal deficit target in
A rate cut of 25 bps has already been discounted. Anything above that
will surprise and move markets.
The government has stuck to fiscal deficit consolidation path,
pegging the deficit for the current financial year at 3.5 per cent of
GDP. In 2015-16, the fiscal deficit will remain below the budgeted
targeted of 3.9 per cent.
As far as inflation is concerned, while WPI has been in negative zone
for past 16 months, CPI is hovering in the range of 5-6 per cent.