Jaitley makes case for rate cut

The government on Monday made a case for a lower interest rate regime citing low inflation as well as the need to revive investments and growth even as experts said the RBI may assess the impact of GST on prices before cutting policy rates.

The six-member Monetary Policy Committee headed by RBI Governor Urjit Patel will meet on Tuesday and the day after for the Second Bi-monthly Monetary Policy Statement for 2017- 18, with experts saying that a status quo on rates is likely.

Finance Minister Arun Jaitley said inflation has been under control for long and is likely to remain so on the back of good monsoon and unlikely spike in oil prices. “...growth and investment need to improve. These are indicators which are available. Any finance minister under these circumstances would like a rate cut, the private sector would like a rate cut. But then when you entrusted it with the MPC, I would rather wait for their decision,” he told a television channel. Industry has been pitching for a rate cut to boost GDP growth which fell to 7.1% in 2016-17, from 8% in the previous fiscal.

The Reserve Bank, however, may wait for the July 1 roll out of the GST and assess the impact of the new indirect tax regime on inflation before tinkering with the policy rates.

The inflation data for July, to be released in August, will give an indication on the impact of GST on prices. Retail inflation, based on Consumer Price Index, dropped to multi-year low at 2.99% in April over last year, mainly due to lower cost of food items, including pulses.