Panagariya pressures Rajan; says time ripe for up to 1% rate cut

Panagariya pressures Rajan; says time ripe for up to 1% rate cut

FPJ BureauUpdated: Friday, May 31, 2019, 10:37 PM IST
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New Delhi : NITI Aayog Vice-Chairman Arvind Panagariya said “time is ripe” for a 0.5 % to 1 % cut in interest rate irrespective of what the US Federal Reserve does. He also expressed hope that the GDP growth can cross 8 % in the current fiscal as investment sentiments are turning around and three quarters are still remaining.

“We need a rate cut of 50-100 basis points. I think time is ripe,” he told CNBC TV 18. On the possible Fed rate hike impacting RBI decision, he said the interest rate increase by the US central bank would not be very steep so it should not make a difference.

“It’s not going to be a major rate hike by Fed but whatever Fed does we may be ripe for 50 basis point rate cut,” he said.

When asked would it be right if RBI cuts rate by just 0.25 %, Panagariya said, “the direction would be right and would add to past 75 basis point reduction and would become one percentage point. May be this will begin the process of the pass through with the little stronger effect.”

Currently, pass through is 0.3 % out of 0.75 % cut in rates by RBI since January this year. The policy repo rate, at which RBI lends to commercial banks for short term, is 7.25 %, at present.

Meanwhile, Panagariya has advised states to follow Tamil Nadu model for framing land acqisition laws as per their needs, while terming the existing 2013 Act as a bit “bit draconian”.

His comments assume significance as the NDA government’s efforts to amend the Land Acquisition Act have faced stiff opposition. Earlier, Finance Minister Arun Jaitley had also advised the states to frame their own Land Act with the Centre’s approval.

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