Press Trust of India
New Delhi, Sept 10: NITI Aayog Vice-Chairman Arvind Panagariya Thursday said “time is ripe” for a 0.5 per cent to 1 per cent cut in interest rate irrespective of what the US Federal Reserve does. He also expressed hope that the GDP growth can cross 8 per cent in the current fiscal as investment sentiments are turning around and three quarters are still remaining. “We need a rate cut of 50-100 basis points. I think time is ripe,” he told a private TV channel.
On the possible Fed rate hike impacting RBI decision, he said the interest rate increase by the US central bank would not be very steep so it should not make a difference. “It’s not going to be a major rate hike by Fed but whatever Fed does we may be ripe for 50 basis point rate cut,” he said. When asked would it be right if RBI cuts rate by just 0.25 per cent, Panagariya said, “The direction would be right and would add to past 75 basis point reduction and would become one percentage point. May be this will begin the process of the pass through with the little stronger effect.”
Currently, pass through is 0.3 per cent out of 0.75 per cent cut in rates by RBI since January this year. The policy repo rate, at which RBI lends to commercial banks for short term, is 7.25 per cent, at present. On the first quarter muted growth numbers, Panagariya said these are preliminary figure for GDP and there is possibility of it getting revised upwards. The GDP growth slowed to 7 per cent in the first quarter of the current fiscal, from 7.5 per cent in the previous quarter, amid deceleration in farm, services and manufacturing sectors.
“I would not write off the prospect of getting past 8 per cent growth rate. We have had quarter when we had grown 9 per cent, 10 per cent. Three more quarters are left. Pick up required is not huge when we spread it to three quarters,” he said. He further said that investments are picking up and sentiment is turning positive. “Foreign investors who were keeping out are now beginning
to return to India. Investors sentiment is now turning around,” he said.
