Arvind Subramanian, Jayant Sinha see case for interest rate cut by RBI

Two key Finance Ministry officials said that the case for easing of interest rates by the Reserve Bank of India (RBI) had strengthened with inflation slowing and the focus staying on fiscal consolidation, the Economic Times reported on Monday.

Minister of State (MoS) for Finance Jayant Sinha and Chief Economic Adviser Arvind Subramanian, both see the situation as being ripe for an interest rate cut by the RBI, the business daily reported.

"RBI is a very professional, data-driven organisation and the data right now is very compelling in terms of interest rates being reduced further," the business daily quoted Sinha as saying.

Subramanian also agreed with Sinha that there was a case for easing, the Economic Times said.

"I think the Budget and the fact that inflation continues to come down should reinforce that to some extent and therefore it does open the space for easing of monetary conditions," Subramanian told the newspaper.

The comments came after the Union Budget 2015-16, which was presented by Finance Minister Arun Jaitley in the Parliament on Saturday, loosened the reins on public spending to drive growth, but promised lower-than-expected borrowing despite raising the government's fiscal deficit target.

The central bank had left interest rates on hold at its policy review on February 3, after unexpectedly cutting the repo rate by 25 basis points to 7.75 per cent in mid-January.

The domestic consumer price or retail inflation accelerated to 5.11 per cent in January, after shifting to a new base year for calculating prices, but stayed well below the RBI's target , bolstering prospects for further interest rate cuts.

(Reuters)