RBI rate cut likely

With the news of output of eight core industry sectors shrinking to 0.4 per cent in April now all eyes are on the Reserve Bank of India Governor Raghuram Rajan and the key question is if he would relent this time and come up with the long awaited announcement of rate cut.

The industry experts feel that this is the right time for RBI to come up with CRR cut as this could help liquidity ease a bit. This would help the manufacturing sector as more liquidity with banking institutions may ease heavy EMIs and would thus attract the consumer to go out and shop. 

Most analysts had forecast a 75 bps to 100 bps cut in 2015 at the beginning of the year. So far, 50 bps have been delivered. It is time to do more.   

Meanwhile, the contraction in April, was mainly on account of the poor generation of electricity and declining output of cement, refinery products and fertiliser, came on the back of March’s marginal decline of minus 0.1 per cent.

Coal and steel sectors only saw an output growth, showed official data released on Monday (June 1, 2015. )

Coal production grew 7.9 per cent, steel output grew but at 0.6 per cent in April as against 6.9 per cent in the same month last year.

The eight sectors contribute 38 per cent to the overall industrial production. Output of the core sectors had contracted 6.7 per cent in November 2014, which fell to 2.4 per cent in December 2014 and then to 1.8 per cent in January and 1.4 per cent in February.

The output of crude oil declined 2.7 per cent in April. Natural gas production was 3.6 per cent lower. Electricity generation shrank 1.1 per cent and cement output fell 2.4 per cent. The production of refinery products declined 2.9 per cent and fertiliser output shrunk marginally by 0.04 per cent.