RBI has cut interest rates thrice in 2013
The much anticipated policy review from RBI has been put on hold as the rupee reached an all time high. From giant manufacturers to small time traders, all are hit by this atrocity. Meanwhile, the Reserve Bank of India was about to review their policy in July and there were high chances of cuts in the policy rate. But, the weak Indian currency has blurred the possibility.RBI has further added that this review in policy might affect Rupee adversely and would create unwanted pressure on it. Although, 2013 has see rate cut thrice but for the time being it has paused its mid-quarter policy review. Even the market experts are not expecting any review from RBI. The falling Indian Rupee has evolved various concerns for RBI.
“Going ahead, the rupee is likely to continue with its bearish trend, as the dollar has started gaining momentum once again,” said Abhishek Goenka, Founder & CEO, India Forex Advisors.
With inflation increased to 5% and Gross Domestic Product (GDP) falling to 5%(2012-13) ,which is the lowest in the decade is pushing RBI out of its comfort zone.
The feeble rupee has adversely affected the country’s current account deficit. The deficit was recorded around 6.7% of the GDP. This was 2.5% higher than what was expected by the Central Bank.
“While several measures have been taken to contain the current account deficit, we need to be vigilant about the global uncertainty, the rapid shift in risk perceptions and its impact on capital flows,” RBI had said in its mid-quarter review.