RBI could go for another rate cut

RBI governor Shaktikanta Das termed the budget’s proposal to infuse ₹70,000 crore of capital into state-run banks as a positive development. Ahead of themonetary policy review on 7 August, he expressed happiness that “the fiscal deficit has been improved from 3.4% to 3.3% (of gross domestic product in 2019-20). RBI will be happy mainly because it limits the so-called crowding out effect. So, that is something very positive because it gives more space for private sector borrowing.”

Finance minister Nirmala Sitharaman stuck to the path of fiscal consolidation in her maiden budget, promising to reduce fiscal deficit to 3.34% of GDP in FY20 from 3.37% of GDP in FY’19. Experts are of the view that RBI might cut rates to give a fiscal impetus to the economy.