Will RBI cut rates as both gold and oil slips?

Associate Director Prof. Manudeep Kaushal today addressed the students of MBA+PGPM highlighting the future policy of RBI. He told the students that Oil and Gold are the two biggest contributors to India’s Current account deficit. As the RBI gets ready to unveil its monetary policy for 2013-14, the expectations are big as there are sharp correction in gold and oil prices.

There is a fall in commodity prices which is accompanied with a lowest WPI inflation in the last three years aided by sharp fall in food inflation. There is a slowdown in manufactured inflation too. However, the other measure of inflation, Consumer Price Index (CPI), stayed high at 10.4 per cent. With good agriculture growth due to normal monsoons, close to 6% overall growth should be feasible. Economy may grow at 6.4% in FY14, as forecast by PMEAC; RBI may cut rates if inflation moderates. A normal June-Sept monsoon would produce bumper harvest and might ease food driven inflation.

While central bank will be carefully watching the inflation, its rates would also be influenced by the course of global economy.