RBI may cut CRR by 50 bps in March, repo rate in Apr: UBS

Even though January inflation slowed down at an impressive rate, the central bank's worry does not end there. Liquidity crunch in the system still continues and the Reserve Bank of India will have to address that while inflation too isn't much at a comfortable level.

Philip Wyatt, Economist, UBS is expecting the RBI to cut cash reserve ratio (CRR) by 50 basis points in its March credit policy review. In an interview to CNBC-TV18 he said, "The last WPI rate gives the authorities the green light to ease. We are looking for a 50 bps cut in the CRR at the March meeting and a 50 bps cut in repo rate in April." The RBI may cut CRR again post March if liquidity crunch continues, he pointed out. On a positive note, Wyatt is hoping that gross domestic product (GDP) will see a growth of 7.3% in FY13. The central bank had a 20-month tightening cycle that ended in October. Headline inflation slowed to its lowest level of 6.55% (MoM) in more than two years in January, as food prices fell, increasing the pressure on the central bank to cut rates to battle the country's economic slowdown. Below is the edited transcript of Wyatt's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video. Q: What are you expecting from the Reserve Bank in the next couple of meetings in March and April? A: We think that the last WPI rate gives the authorities the green light to ease. We are looking for a 50 bps cut in the CRR at the March meeting and a 50 bps cut in repo rate in April. Q: There was some trepidation about the pace of cuts that we would see this year given the global setup and what was happening domestically as well. How sharp do you think the rate decreases will be through the course of this year? A: That