3 min read.Updated: 07 May 2013, 06:04 PM ISTRenu Kohli
The 6% WPI inflation out-turn this Mar undershot RBI’s indicative projection of 6.8%. Chances are that RBI will find its projections belied yet again
The Reserve Bank of India’s (RBI) monetary policy stance for 2013-14 raises more questions than they answer. The central bank expects baseline gross domestic product growth to increase to 5.7% in 2013-14 from 5% last year while wholesale price inflation is projected in the 5.5% range, a tad lower than the 6% at end-March 2013; the endeavour, it says, is to bring headline inflation down to 5% by March 2014. Against this backdrop, the 25 basis points cut in the repo rate makes sense. What puzzles is the guidance: the balance of risks arising from this inflation growth dynamic leave “little space" for further easing; indeed, the dark picture of inflation and current account deficit risks presented in its macroeconomic assessment the previous day persuaded many in the market to believe that there may be “no space" for easing the next day itself! It was little surprise that stocks fell and yields rose at the inflation-speak, notwithstanding the quarter per cent interest rate cut.
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