SME Times News Bureau | 18 Jan, 2019
Ahead of the Reserve Bank of India's
(RBI) monetary policy review early in February, a report expressed concern over
possible slippage.
"There is a high likelihood of a change in RBI stance
from 'calibrated tightening' to 'neutral' with a possible rate cut in the next
MPC meeting. Fiscal slippage, however, continues to be a risk for rate
cut," JM Financial said in its report on Thursday.
The Report came amid demand by the industry to cut key rates
by the central bank to facilitate credit.
JM Financial has predicted that CPI inflation over the next
three months to inch up from the current levels, but will remain in the range
of RBI's forecast, which is 2.7 per cent to 3.2 per cent.
The double digit food inflation during 2008-14 was tamed to mid-single digits
over the last four years owing to easing agri-imports in a declining global
agri-commodity price environment and steady yield improvements, it said.
The report, however, mentioned that in the last three months, food inflation
has turned negative and that its study indicates a build-up of excess supply in
several food categories (pulses, fruits and vegetables, sugar, milk etc.)
exerting price pressure.
"Liquidity challenges have also adversely impacted economic activity, as
per our channel checks," it added.
The report also takes note of liquidity challenges in the rural economy saying
the low food inflation does have calming impact on the overall inflation, but a
sustained low inflation regime can also lead to adverse impact on rural income
and can be a cause of social unrest, it warns.
Though the government maintains confidence in meeting the
3.3 per cent fiscal deficit target for this fiscal, the deficit in the first
eight months till November stands at Rs 7.17 lakh crore, or 114.8 per cent of
the Rs 6.24 lakh crore full year's target.