Reserve Bank of India likely to cut interest rate by 0.25%

New Delhi: Raghuram Rajan who is Reserve Bank Governor hopped to reduce interest rate on Tuesday by a 0.25% to a 4-year low to quickly a slow economic recovery, but may underscore considers over prices in a year when monsoon rains have been lacking. RBI will issue its fourth bi-monthly economic policy for the current fiscal amid a demand by the government as well as the industry for a reduce in interest rate in view of subdued inflation, which Rajan had cited previously for no action. The RBI Governor Raghuram Rajan has been under pressure from the Finance Ministry as well as corporate executives to reduce interest rate to spur recovery and mitigate the impact of slowing China on India. Even Finance Minister Arun Jaitley last week asserted that common sense says interest rates should come down. Jaitley had said inflation is "very much under control" and the country is better prepared than most emerging economies to weather the global economic turbulence. Global turmoil triggered by devaluation of the yuan and reports of a slowing growth in China have impacted Indian currency and stock markets. As regards the price situation, the wholesale price index (WPI) remained in the negative territory for 10 months in a row and stood at (-)4.95 per cent while retail inflation eased to a record low of 3.66 per cent in August. The first quarter GDP print of 7 per cent was below market expectations while industrial output growth in April-July came in at 3.5 per cent. India Ratings and Research said it hopes RBI to take a gradual route of repo rate moderation and sound cautious in its tone. Major lenders like the State Bank of India also expect RBI to lower the repo rate.