RBI may refrain from rate cuts

.....From a central bank’s perspective, it is unfortunate that slowing growth is being accompanied by stubborn inflation. However, this unpleasant outcome and the prevalent macro pressures should be traced to the high fiscal deficit being run by the government. Thus, we are following a sub-optimal policy mix, which cannot be corrected unless the government decisively cuts the fiscal deficit and puts the country back on the path of fiscal consolidation. Till that time, RBI may have no choice but to refrain from cutting rates. The central bank can, perhaps, point to the fact that it has already done its bit for the economy with the April rate cut and a proactive liquidity management strategy.........

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