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Jun 06, 2012, 05.55 PM IST
RBI deputy governor Subir Gokarn on Monday told CNBC-TV18's Gopika Gopakumar that the lower-than-expected fourth quarter GDP and falling crude prices provided elbow room for the central bank to cut rates.
Ahead of the RBI's mid-quarter policy review, RBI deputy governor Subir Gokarn on Monday told CNBC-TV18's Gopika Gopakumar that the lower-than-expected fourth quarter GDP and falling crude prices provided elbow room for the central bank to cut rates. "However, inflation could limit the room to maneuver," Gokarn forecasted.
Also watch the accompanying video. "The elbow room is from lower oil prices. I think the levels that being seen today at USD 97-98 per barrel are somewhat lower than most people anticipated maybe a month or two ago. So that is providing some room. Notwithstanding the rupee depreciation over this period, the drop in oil prices has gone a bit above the extent of rupee depreciation." However, Gokarn has warned of rising inflationary pressures and concerns on high fiscal deficit. "Food inflation came out rather high in April. The RBI is waiting and watching to see the data in May. The deficit remains a concern which the RBI has been voicing for quite a while. The RBI was particularly emphatic on this in the last policy statement and need to see some corrective action on that. Again softer oil prices will provide some relief on that front as well. But the factors are imbalanced." Economists say Gokarn's statements on Monday indicate that the RBI has become more dovish than before. Some are now factoring in more rounds of rate cuts even after the mid-quarter review in June.
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