- RBI is expected to cut its interest rates yet again today after five successive cuts this year.
- This time however food inflation might not give RBI the fiscal freedom for a deeper rate cut.
- GDP for the second quarter slowed to a six year low, and October core sector index fell by 5.5% in October.
- A major fiscal stimulus is hindered by the lack of available household financial savings, say economists.
The Reserve Bank of India has its task cut out this policy. The central bank has cut interest rates at every policy review this year, might have to do it again. Only, this time it should be deeper and more impactful, especially since the country’s GDP has slowed down to a six year low – to 4.5% for the second quarter.
The country’s interest rates, after five successive cuts, is at its lowest in ten years. But it was not enough. Not after, core sector performance fell by 5.8% in October.
India’s $5 trillion dream needs more than just interest rate cuts
“Despite the policy initiatives taken by the government during the past few months and RBI’s continued accommodative stance, the GDP grew at a much lower rate in the second quarter, the lowest in last 26 quarters. This has confirmed the fears of continuing slowing down of Indian economy. Much of the Q2 growth in GDP came in through rising Government