Will Rajan cut rates in his final policy review?

Raghuram Rajan, the Chief Economic Advisor turned Governor has come a long way. All eyes will be geared on final policy review of the RBI boss which is on Aug 9. Well, the occasion which used to have anticipation and hype of the rate cuts somehow looks missing. The latest high food prices mean the rate cuts are unlikely.  But the thing to watch in this bi-monthly policy review will be inflation target set and stress asset further action plan set by the much praised former International Monetary Fund Chief Economist. Governor has reduced the benchmark interest rate by 1.5 per cent since January last year, and has been persuading banks to fully transmit the benefit of the policy rate cut to customers. The market has already discounted that rate is not going to be cut this time and their markets are expected to be from flat too green.

When Dr Rajan took over as RBI chief in 2013, India was reeling under high fiscal and current account deficits in a slowing economy. India was then clubbed with "Fragile Five" countries, a term used for countries with high inflation, currency volatility and weak growth. When he is leaving, India is the fastest-growing big economy in the world. After today’s policy review, the race for the Governor post will further gain momentum as the incumbent’s terms ends in Sept next month.