After surprising everyone with four successive rate cuts this year, Reserve Bank governor Shaktikanta Das on Thursday said “there is more room” to do so given the growth deceleration and stable inflation that is likely to stay below target for a year or so.
However, the governor was quick to add that there is little fiscal space for the government to unveil any countercyclical measures to boost the sagging growth and the only way to revive the growth engine is to front-load the budgeted capex, hinting that only an easy money policy can help salvage the situation.
Since assuming charge mid-December, the Das-led rate-setting panel has delivered four successive rates cuts, with the fourth one last month being the most surprising and unconventional one as he chose to deliver a 35 bps repo cut. The RBI has delivered a cumulative 110 bps repo reduction since February, yanking down the key benchmark rate to a nine-year low of 5.40 pc.
“When we see that the price stability is maintained and inflation is much below the 4-pc mandate and is expected to be so in the next 12 months horizon, there’s a room for more rate cuts especially when growth has slowed down,” Das told Bloomberg India economic summit this evening.
On the shrill calls from industry for fiscal measures in the form of tax cuts, Das said, “the government must front-load the budgeted spending as it has little fiscal space for any countercyclical measures to boost growth.”
Stating that there is little space for fiscal expansion, Das said, “so far as the fiscal side is concerned, the Centre has by and large remained prudent. They have not announced any countercyclical measures that would have lead to fiscal expansion. Most of these things are non-fiscal.
“The fiscal space is itself very limited. Fiscal deficit at 3.3 pc borrowings by PSUs both put together there is very little space. But what is the internal position of the govt with regard to tax collection, how much expenditure is likely to be materialised, that is something the govt has to view,” Das said.
Indicating deepening crisis in the economy, which is partly cyclical and more structural, the government had more bad news pouring in recent days. While advance tax mop-up missed the target by a wide margin inching up by a paltry 4.7 pc in for the first half against a target of 17.5 pc at Rs 5.50 lakh crore up from Rs 5.25 lakh crore a year-ago. The first quarter GDP slowed to a six-year low of 5 pc and last month for the first time exports degree.
100 applicants for post of RBI Deputy Governor
Nearly 100 candidates have applied for the post of deputy governor of the Reserve Bank of India (RBI) - a position that fell vacant after Viral Acharya resigned six months before the scheduled end of his term. The finance ministry has received about 100 applications for the post, which have been sent to the high-level panel that will select a suitable candidate for the post, sources said.