Change in policy rate unlikely till fiscal-end: D&B

Supply side issues need to be addressed

Change in policy rate unlikely till fiscal-end: D&B

The Reserve Bank of India is likely to keep its policy rates unchanged till the end of this fiscal year and a probable rate action is likely only in the next fiscal, said report.

According to Dun & Bradstreet, the moderation in inflation is largely owing to base-effect and supply-side pressures to inflation still remain.

"The battle against inflation will continue till supply-side issues are adequately addressed. RBI would thus keep its policy rate unchanged till the end of this fiscal year with a probable action visible only in early next financial year," Dun & Bradstreet India Senior Economist Arun Singh said.

CPI inflation moderated to 7.8 per cent year-on-year in August (as against 8.0 per cent year-on-year in July). The wholesale inflation also fell to a nearly five year low of 3.74 per cent in August.

"On the WPI inflation front, there is a significant base effect at play, resulting in moderation of food prices and it will continue to do so in the forthcoming months as well," Singh noted.
D&B expects the CPI (combined) inflation to remain range-bound at 7.6 per cent-7.8 per cent during September 2014. On growth, the report said that "tentative" signs of strength are emerging in the country, but a full-fledged cyclical recovery is still some distance away, the report said.

The country's GDP expanded at the fastest pace in the first quarter of fiscal 2015 since Jan-April period of fiscal 2012, driven by a sharp recovery in industrial growth and gradual improvement in services sector.

"The government has announced several measures to improve the ease of doing business and there has been some progress in clearing and reviving stalled projects. That said, a full-fledged cyclical recovery is still some distance away and the current macro-scenario should be construed with some caution," Singh said.

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