Bloomberg/New Delhi

India’s finance ministry continued to push for an interest rate cut after the country’s two main inflation gauges slowed more than estimated this week.
India’s economy could expand faster and risks to growth would be mitigated if interest rates are lowered, Finance Secretary Rajiv Mehrishi said in an interview yesterday.
Sluggish manufacturing, low loan demand and shrinking exports could be worsened by China’s currency devaluation, he said.
“If the RBI decides to lower rates then certainly it will help the economy and some of the possible risk areas that we identified will get relief,” he said, referring to the Reserve Bank of India. “Inflation is under control.” Central bank governor Raghuram Rajan has rebuffed calls to cut interest rates as he awaits more clarity on whether consumer-price inflation will hit his 6% target for January. India has the fourth-highest borrowing costs among 14 Asia-Pacific countries tracked by Bloomberg.
Consumer prices eased to an eight-month low of 3.78% in July. Wholesale prices in July fell the most on record, according to data released yesterday.
Rajan left the repurchase rate unchanged at 7.25% on August 4 after cutting it three times this year. While two of those cuts have come in unscheduled meetings, he’s held rates at three of four reviews in 2015.
The central bank expects CPI to hit 4% in August and rise toward the 6% target by January.
Most of 18 analysts in a Bloomberg survey conducted after the CPI data predict Rajan will cut borrowing costs as early as the next meeting on September 29. Five say he may opt for another unscheduled cut, with some saying he’ll wait for one more month of inflation data.
“RBI is best placed to make a decision on the rate cuts,” Mehrishi said. “It is a view they have to take and I am sure they are taking it in the best interest of the country.” Mehrishi said the government and central bank have reached a “broad” agreement on a rate-setting panel and debt office.
Prime Minister Narendra Modi’s administration will look to cement it into legislation in the next parliament session due late-November, he said, without elaborating.
Mehrishi also said the government will achieve almost all of its Rs695bn ($10.9bn) disinvestment target.
Stake sales so far have been only 5% of the budgeted amount for the year through March 2016.
India’s factory output has grown an average 1.6% each month since January 2013, almost half the pace of the previous two years. Credit growth hit a two-decade low in February and exports have shrunk for seven straight months, undermining the government’s efforts to boost investment.