On Tuesday, Reserve Bank of India (RBI) governor Shaktikanta Das responded to queries on whether the repo rate would reach a historic low of 5-4.75 per cent, saying that the central bank’s policy would be to continue with an accommodative stance “as long as it is necessary to revive the growth momentum.”
The statements, reported by IANS, comes after the RBI, on October 4, cut rates for the fifth time in a row to 5.15 per cent, while also cutting its growth estimate for 2019 to 6.1 per cent from an earlier estimate of 6.9 per cent. This was the lowest RBI repo rate since March 2010.
Speaking on the possibility of another rate cut, Das said, “What we want to say that we are giving some kind of forward guidance that as long as growth momentum remains as it is and till the growth is revived, the RBI will continue to remain in an accommodative mode.”
He added, “You cannot make a conclusion out of it on what is the minimum rate, what is the minimum repo rate where the RBI will take a pause. It is not possible to comment on that at this particular point of time. All that it says is to give clear indication that RBI will continue with the accommodative stance as long as it is necessary to revive the growth momentum.”
Das indicated that the next meeting of the Monetary Policy Committee (MPC) will decide on whether a historically low repo rate will become the lower bound or not.
Many analysts predict another rate cut in December, with Goldman Sachs predicting a cut of 25 basis points “consistent with our forecasts of an additional rate cut by the (US) Fed in October”. The last time the RBI rate's went below five per cent was during the Great Recession, between 2009 and 2011.
Das added that the RBI had no reason to doubt the government’s commitment to maintain its fiscal deficit target for the year, which is 3.3 per cent. In similar comments made on October 4, Das said the shortfall incurred by the corporate tax cuts could be made up from other sources of revenue.
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