Government is increasingly looking to the central bank to help boost a flagging economy before an election that kicks off next week. And new Governor Shaktikanta Das is turning out to be a willing partner.He is set to deliver a second consecutive 25 basis-point interest rate cut this week, according to most economists in a Bloomberg survey, reversing two hikes made by his predecessor Urjit Patel last year. Since taking over at the Reserve Bank of India in December, Das has relaxed restrictions on weak state-run banks to help spur borrowing, and allowed lenders to restructure loans to small and medium-sized businesses that are in default.An RBI panel is also considering a government request to transfer more of the central bank’s excess capital to the state. That’s well below the 8.2 percent growth seen in the April-June quarter.“Our India current activity indicator is suggesting some slowdown in the near-term,” said Prachi Mishra, chief India economist at Goldman Sachs Group Inc. in Mumbai. Das’s decision risks renewing a build-up of bad loans “The rapid exemption of state-run banks from the prompt corrective action suggests that Das risks swinging the pendulum too far to the other side," said Priyanka Kishore, head of India and Southeast Asia research at Oxford Economics Ltd. in Singapore.

Source: Economic Times April 02, 2019 03:26 UTC