Mumbai: India’s central bank will make a “big mistake" if it raises interest rates this week, according to veteran emerging markets investor Mark Mobius.
His view goes against the crowd. Most economists in a Bloomberg News survey expect the Reserve Bank of India to raise the report rate by 25 basis points on 1 August, a second hike in eight weeks. The six-member monetary policy committee headed by Governor Urjit Patel began its discussions on Monday.
Headline inflation is at the highest level in five months and above the 4% midpoint of the central bank’s target band, while core inflation—which strips out food and fuel—has climbed above 6%.
But Mobius said that various Indian states are facing problems and a cut in borrowing costs is what’s needed to boost investments.
“I think they should lower interest rates in India, not raise them because you have many states with different economic situations all over the country," Mobius, partner and co-founder of Mobius Capital Partners, said in an interview with Bloomberg TV in Hong Kong. “You got real differences in India. It would be a big mistake for them to raise."