RBI : The Reserve Bank of India is expected to cut down key interest rates by 25 bps at its policy review meet on April 5th, a Bank of America Merrill Lynch (BofA-ML) report says. In accordance with the global financial services major, the implementation of the 7th Pay Commission recommendations should support consumption requirement in the country but would limit planned expenditure. Click for Options tips
In response, we estimate the RBI to cut rates by 25 bps on April 5th as the fiscal deficit is already low compared to history, RBI's Mr. Raghuram Rajan on Feb 2 left key interest rate unchanged citing inflation risks and growth concerns, while pegging further easing of monetary policy on proposals of government's budget. Mr. Rajan told RBI "continues to be accommodative" but would look forward to the govt's budget proposals on Feb 29 as also the inflation trend. BofA-ML estimates Budget 2016-17 to TGT(target) a fiscal deficit of 3.8 per-cent of GDP, a tad lower than financial year 2015-16's 3.9 per-cent, but higher than the pre-committed 3.5 per-cent.
