Expert views on RBI's CRR cut

The Reserve Bank of India (RBI) left interest rates on hold on Tuesday but cut the cash reserve ratio for banks by 50 basis points, a move that eases tight liquidity in the banking system and underscores a policy shift from fighting inflation to reviving growth.

Jagannadham Thunuguntla, Strategist and Head Of Research, SMC Global Securities says, "The CRR cut is more of an indicator that the repo rate and reverse repo rate cuts are around the corner and I believe that would happen in March. I think growth and inflation are equally important for the central bank now."

Background:

- India's growth outlook and business climate have weakened but upward risks to inflation remain, the RBI said on Monday.

- The wholesale price index, the main inflation gauge, rose 7.47 percent in December from a year earlier -- easing below 9 percent annual pace for the first time in a year as food prices cooled. However, manufactured products inflation edged up in December.

- The food price index declined 0.42 percent in the year to January 7, compared with an annual drop of 2.9 percent in the previous week. The fuel price index climbed an annual 14.45 percent, the same as the week before.

- Production at factories, mines and utilities grew 5.9 percent from a year earlier in November, the fastest clip since June, recovering from a contraction in the previous month and well above the forecast of 2.2 percent growth in a Reuters poll.

- Asia's third-largest economy is likely to grow at its slowest pace in two years in the fiscal ending in March at 7 percent, as tight monetary policy and a logjam in government policy making stifles investment, a Reuters poll showed.