From ‘Reluctant Raghu’ to ‘Rate-cut-Raghu’: Anand Mahindra

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Chennai: Automobile group Mahindra & Mahindra (M&M) chairman Anand Mahindra Thursday termed RBI governor Raghuram Rajan as ‘Rate-cut-Raghu’, following the central bank’s decision to cut the repo rate by 25 basis points.

Reacting to the rate cut Anand Mahindra tweeted: “Three cheers! The RBI governor has moved from being ‘Reluctant Raghu’ to ‘Rate-cut-Raghu’!”

However, he said the market’s euphoria is justified only if this signals more rate cuts to follow.

“Need 100 bp (basis point) reduction for a tangible impact on consumption,” he tweeted.

“The confidence of the RBI (Reserve Bank of India) that the global deflationary trend would continue and that the government would be able to keep its words on fiscal consolidation has led it to move with an out-of-policy rate cut,” said Indranil Pan, chief economist, Kotak Mahindra Bank.

“With the first rate cut done, we expect the RBI to stay on course for more cuts of 25 basis point each in the near future. Key domestic events for the RBI are the Union Budget 2015-16 where a high quality fiscal consolidation is sought. Given that the fiscal is in order we would expect the next cut to be in the first week of March, after the budget in February,” he said.

According to him, the extent of the cut may still not be too deep and the extent could be capped at a cumulative 75-100 basis point.

RBI has to be careful of the inflation expectations if growth picks up while the savers also need to be provided with adequate real returns for the savings rate in India to rise and reduce reliance on foreign money for growth, he added.

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