Case for rate cut

Softer lending rates alone can't drive up growth, but they certainly play an important role

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Reserve Bank of India Governor Sanjay Malhotra was bang on when he said at the FE Modern BFSI Summit on Friday that the 100-basis point (bps) repo rate cut in a span of less than six months has raised the bar for further easing of rates. Though Malhotra took care to add that any future action will depend on the outlook for both inflation and growth, the signal seems to be that the monetary policy meeting in August will be tilted towards a pause. Some believe the Monetary Policy Committee in its last meeting may have played its cards too soon, especially at a time when US President Donald Trump's tariff tantrums have added a new and completely unpredictable dimension to the normal growth-inflation trade-off. But as the governor said, in a world of uncertainty, the economy can do with some certainty.