Need 40-50 bps cut to revive growth: Kotak Chief Economist
New Delhi: The Reserve Bank of India's 25 bps point rate cut is not sufficient to revive growth and an additional 40-50 bps cut is required over the next six months along with fiscal mesures from the government for the purpose, Kotak Mahindra Bank's Chief Economist Upasana Bhardwaj said on Friday.
"We were looking at a little more aggressive rate cut of 40 bps. It happened lower. It is not sufficient and we need more monetary accommodation. The RBI's policy has stated that they will be looking at further policy accomodation if growth requires it. So there is going to be further rate cut going ahead," Bhardwaj told IANS.
She said 40 bps reduction means that they could be heading towards a terminal repo rate of 4.65 or 4.75 per cent. But Bhardwaj also stressed that monetary policy alone can not revive the economy from the slowdown.
"It's not only about the monetary easing which can revive growth. There are many other problems of the economy. Hence from a monetary point of view, there is so much that the RBI can do already reducing it by 135 bps and additional 40-50 bps going ahead, that should be sufficient.
"Then there will be the government which can come out with fiscal measures - all of these - fiscal and monetary measures - together in a coordinated manner should help in reviving grow th. But it will not be an immediate revival, it will be a gradual revival," she said.
Bhardwaj also added that GDP growth has a favourable basis in the H2 of the year. "So base effect is positive in the second half, so we expect better numbers. Q3 is a festival season so slightly better, so we should be beginning to see improvements from Oct-Dec quarters onwards. Till September, H1 is very weak. H2 will see mild recovery."
Earlier in the day, RBI cut the repo rate by 25 basis points to 5.15 per cent, taking the total rate cuts to 135 bps.
The government has taken a number of measures since August 23 to pull the economy out of a six-year low growth and a 45-year high unemployment rate by reviving private investment.
Last month, the government cut the corporate tax rates for domestic companies, a move which has a tax revenue loss of Rs 1.45 lakh crore.
The government also withdrew enhanced surcharge on long- and short-term capital gains for foreign portfolio investors as well as domestic portfolio investors with revenue implication of Rs 1,400 crore.