Decimal Point Analytics CEO, Mr. Shailesh Dhuri Says India Needs a Rate Cut of 250 BPS in the Next Seven Months

RBI should reconsider its stance of holding the policy rates steady given the current economic ground reality. India will need a 250 bps rate cut in the next seven months.

Mumbai, India, September 04, 2020 --( Recently, Indian GDP for June 2020 Quarter printed -23.9% growth. Interestingly, just a few weeks before this print, RBI Monetary Policy Committee announced that it was holding rates steady because Consumer Price Index (CPI) inflation was at 6.93%, outside the target range of 2% to 6%.

Mr. Dhuri in his recently published article titled “Guiding policy-making through the fog of COVID-19 induced lockdowns” questions the underlying logic of keeping the interest rates steady while we have strong de-growth, disrupted supply, and non-demand driven inflation in the economy. He also talks about how the Taylor rule of monetary policy can be used as a guide in this scenario. Running the numbers using the Taylor rule presents us with some interesting finding for the March 2021 policy rates and highlights the fact that India may need a 250 basis points rate cut in the next seven months

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Decimal Point Analytics is a financial research and analytics company incorporated in 2003 with headquarters at Mumbai. It is an independent, management owned company, which provides actionable analytics to financial services companies. It offers customized solutions to investment management businesses that address specific challenges. It enables these customers to supplement their operations with additional resources and augment research processes using Artificial Intelligence (AI) technologies like Machine Learning (ML), Natural Language Processing (NLP) and Big Data.

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