New Delhi: Accounting major Goldman Sachs has said, that it expects the Reserve Bank of India (RBI) to the cut the CRR by 25BPS in the upcoming policy review meeting on Tuesday, December 18. They have come to this conclusion as the pick up in reforms, fall in headline inflation, and the weak GDP growth makes it likely that the RBI might be looking at such a solution, like it did previously, but nothing official has been said on behalf of the RBI yet. As per an official communique from Goldman Sachs, "We believe there are several reasons for the RBI to act now as against the market expectations, as both growth and inflation are surprising on the downside relative to the RBI's forecasts."
The investment bank is of the view that with inflation prints for October and November coming lower than its forecasts, there is a strong case for the RBI to act sooner than its guidance. Goldman expects the RBI to deliver a 25 bps cut each in December and January, relative to its earlier view of 50 bps in March. This view is largely driven by the downside surprise in inflation in October and November. GDP growth for the first half of fiscal year 2012-2013 at 5.4% was well below the RBI's full-year forecast of 5.8% and Goldman's estimate of India's potential growth rate of about 7%.
(With inputs from ET)