New Delhi/ Mumbai, June 02 (ANI): Reserve Bank of India’s (RBI) decision to cut interest rates shows the economy needs support, Chief Economic Adviser Arvind Subramanian said on Tuesday.
RBI cut interest rates for a third time this year, taking advantage of subdued inflation to boost an economy that many economists doubt is doing as well as latest impressive growth numbers suggest. Subramanian also said the government would try to contain inflationary risks if the summer monsoon rains turn out to be weak.
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Meanwhile, the Sensex and Nifty slumped more than 2 percent on Tuesday, led by losses in lenders after the RBI did not offer clarity at its policy review on further easing to spur growth. The RBI, which cut its policy interest rate by a quarter percentage point in its third policy easing this year, said the more appropriate stance is to “front-load a rate cut today” and wait for data to clarify uncertainty.
Analysts said RBI governor Raghuram Rajan could have announced a further cut in the rates since macroeconomic factors did not look good. They said that inflation was still a major cause of concern especially with the prediction of a bad monsoon this year. RBI has also warned it would closely track inflationary trends, citing risks posed to food prices if monsoon rains are wea
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