With inflation in manufactured items showing signs of decline, the Finance Ministry today expressed the hope that RBI will reduce the key interest rate in its monetary policy review next week.
“We believe that the RBI will do a comprehensive and nuanced analysis of the economy and take the right decision and we hope it will vote for growth. I am happy with what he (RBI Governor D. Subbarao) has said,” Department of Economic Affairs Secretary Arvind Mayaram told PTI.
Industry is demanding a cut in the repo rate to help revive India’s sagging GDP growth that hit the decade’s low of 4.5 per cent in the third quarter of 2012-13.
The Secretary said the rise in the Wholesale Price Index (WPI) based inflation is largely due to food inflation.
“But if you remove the element of food from the calculation, then actually it has come down,” Mayaram added.
He, however, said food inflation is “worrisome” and it is necessary to look at it.
According to the WPI data, inflation in manufactured goods has moderated to 4.51 per cent in February against 5.82 per cent in the same month last year.
In his address at the London School of Economics yesterday, Subbarao had said there “has been some very welcome although much delayed action on correcting both the CAD and the fiscal deficit over the last six months”.
“More notably, the recent Budget has firmly embraced fiscal responsibility by restraining the fiscal deficit next year consistent with the road map recommended by the Kelkar Committee,” he had said.
Most analysts are expecting the RBI to do a trade-off with growth with at least a 0.25 per cent cut in the short-term lending rate in the March 19 policy meet.