The Reserve Bank of India (RBI) should go for a rate cut above 25 basis points in its next monetary policy review in June to reverse the ongoing slowdown in the economy, said a research report by the State Bank of India (SBI).
“Are we currently facing a quasi growth slowdown? The apparent nervousness is clearly reflected in the trends exhibited in key stock indices,” said the SBI’s research report ‘Ecowrap’.
Initial trends in fourth quarter of 2018-19 reveal an overall fall in sectors namely telecom equipment and infra services; agro chemicals; petrochemicals; infrastructure developers and castings, noted the report.
Besides, the pharmaceutical companies dependent on exports are likely to report sluggish growth numbers. In January-March 2018-19 quarter, of 384 companies over 330 companies exhibited low growth in mid-line and bottomline.
Perhaps, strong fall in rural prices is disturbing rural income and weak demand is hindering the FMCG sector, the report said.
“We still believe the current slowdown could still be transitory, if proper policies are adopted in interregnum. For example, the high real interest rates are severely acting as a impediment to investment,” said the report.
“We are thus pencilling a larger rate cut (in excess of 25 bps) by RBI in the forthcoming policy,” the report stated,
However, the report added that such larger rate cuts will still not help fully but the transmission will