Expect banks to transmit rate cut fully to mkt: Shaktikanta Das

Speaking to the channel Nirmala Sitharaman, Minister of State for the Ministry of Commerce & Industry, said the fact that the Indian economy is moving forward is recognised by everybody.

Sitharaman also said that efforts in recovering black money has been a success. The industry can draw a lot of comfort with GST moving smoothly.

As regards exports, she said recovery in exports will be slow, but it will be steady.Below is the verbatim transcript of Shaktikanta Das\\'s interview to Shereen Bhan on CNBC-TV18.Q: The monetary policy committee (MPC) has delivered its first policy and a 25 basis point rate cut has come through. In your assessment how significant or meaningful is this going to be to try and revive the investment cycle, because as was admitted by the Governor himself the transmission has been below expectation?A: The first thing is that it’s very heartening to note that the MPC has started functioning. This was the part of this year’s budget announcement and the amendment was carried through. It is very heartening that the committee has met and I am told that there was unanimous view about the rate cut, which RBI has effected.Now coming to the specific issue, the specific question which you have asked, the rate cut is highly welcome and I would expect the banks to transmit the rate cut. It is true that the Reserve Bank from January 2015 till now has reduced without taking into account the current reduction of rates. The reduction so far has been about 150 basis points against which the transmission has been about 70 basis points or so.To that extent the Governor is right that there is greater room, there is lot of room for improving the transmission of rates. This round I would expect the banks to transmit the 25 basis points fully to the markets and I would expect that to happen.Q: Let me also ask you whether you believe there is room for further rate cut by March 2017, because the expectation is and the Governor did point that out in his press conference that they are working with a real interest rate at about 1.25 percent. Do you believe that leaves the room open for another rate cut by March 2017?A: No, I would not like to speculate on the room for further rate cut, because it is not appropriate for me to sort of speculate and so therefore whatever rate cut has now been effected and the earlier rate cuts, currently there is a good ground for transmission of rates by the banks and I would expect that to happen and the bank should do it.Q: On inflation the Governor did point out that there continue to be upside risks to inflation, the Seventh Pay Commission, the minimum wage hike will add to cost pressures is what the Governor had to say, but he also admitted that there has been structural changes especially on the supply side and better food management, but inflation target of 5 percent by 2017 do you believe that that we are going to be able to achieve that and what is the assessment now as far as inflationary pressures are concerned?A: It is very much achievable and the RBI forecast is they are expecting 5.3 percent retail inflation in the current year. Yes, there are positive developments with regard to the food prices and in fact going forward in the next 3-4 months, one would expect the food inflation to moderate further so that will be net positive for the inflation.Now with regard to Seventh CPC impact let me mentioned that perhaps the Reserve Bank concern comes from the fact that house rent allowance will get revised sometime now or later. As and when house rent allowances revise normally in the way the CPI is calculated the increase in house rent allowances do contribute to the inflation, but when you have so many positives happening like the food inflation which in fact constitutes a major chunk of our retail inflation. When food inflation is moderating any sort of increase due to some other factors will get well absorbed reasonably.Below is the verbatim transcript of Nirmala Sitharaman\\'s interview to Timsy Jaipuria on CNBC-TV18.Q: Your views on the RBI rate cut of 25 basis points?A: I welcome the measure because I think it’s time since both the current account deficit and also the inflation are all fairly under control. It time that the interest rates also reflect this position and I understand this will be the lowest in the last 6 years that we have reached and it is also equally important that the banks pass this on to the consumers.Q: Private sector investment has not been happening, India Inc wanting a rate cut and they have been making a lot of presentations to you, how do you see the private sector reacting to it?A: I am sure the private sector works on many factors at a same time, not just this one, this one also is now favourable, but the environment and also the way in which the globe is perceiving India, perceiving India’s competitiveness the way in which our economy is moving forward is now recognised by everybody.Governments attempt at getting the black money not so disclosed income and other things have also seen a major success and therefore today the industry can definitely draw a lot of comfort from the various factors, which are giving a lot of strength to us and with the goods and services tax (GST) now going through smoothly I think Indian economy is looking upwards. Our corporate investors also should now move forward.Q: When we talk of corporate investment and private investment, there are still some loopholes which are there and corporate sector has been asking for a further rate cut also. Do you see room for further rate cut?A: Well, let see, the monetary policy committee has taken a first decision today and I am glad all the team members were together with the Governor as they were announcing this. We will watch the space.Q: Rupee is now stable and exports are still falling. How do you see exports in the coming month and in the remaining part of the year?A: As I said, even sometime back the recovery in exports is probably going to be slow, but I am sure it will be steady. We hope that with the festival season coming in India and also the global markets in various countries, there are steps being taken to pep up their economies. All this hopefully will give a boost to global demand situation. It may or may not be adequate, but our exporters are fairly aware of the difficulties which are around, but the various steps that we are taking at different levels and for different segments within exports are also pushing the agenda of project export and so on, so I hope there will be a slow but sustained growth in demand.