As the six-member Monetary Policy Committee (MPC) is scheduled to announce the fourth bi-monthly monetary policy for 2019-20 on Friday, renewable power producer ReNew Power expects a massive cut in interest rates.
In an interview to CNBC-TV18’s Anshu Sharma, Sumant Sinha, chairman and managing director, said, “I do not see why real interest rates in India should be as high as they are. I know there is some argument to be made to protect savers, but I think that is the wrong way of doing it. I think you cannot have companies borrow at 7 percent of interest rate or even higher than that and I think it’s depressing both the consumption demand as well as investment appetite in the country.”
He further added, “I don’t see any reason why there shouldn’t be a 1 percent cut in interest rates as inflation is at 3 percent, the repo rate is at 5.4 percent and it is supposed to be an accommodative rate, that is 2.4 percent real repo rate. So, I do not understand why it should be so high. In other countries, the accommodative monetary policy typically means 0 percent interest rate. The other question is inflation is at 3 percent, the RBIs target is 4 percent plus / minus 2 percent. So, we actually have a lot of room for inflation to go. I think inflation expectations are anchored. I think the only people for whom inflation expectations are not anchored right now is the RBI who keeps having the apprehension that inflation might suddenly go up. However, it hasn’t gone up for the last 18-24 months. So, with the whole economic activity being so depressed, why should there be any expectation that inflation will go up?”