Four weeks since official data showed the shocking deceleration in gross domestic product (GDP) in the first quarter of fiscal year 2018, demands for a rate cut haven’t been as vociferous as one would expect.

Bond yields have risen, stock indices have slipped and the rupee has depreciated. Of course, a lot of it was due to the US Federal Reserve’s indication that it would begin its unwinding in October. But most economists are not confident of a second rate reduction in a row by the Reserve Bank of India (RBI) after the rate cut in August.

The key reasons are that inflation has rebounded sharply as was forecast by the central bank in August. Oil prices globally are on the rise, the monsoon rainfall hasn’t lived up to the temporal distribution crucial for a good agricultural output and the government could overshoot its fiscal deficit target of 3.2%.

However, all of this was anticipated by RBI when it slashed its repo rate by 25 basis points to 6% in August. A basis point is one-hundredth of a percentage point.

For the central bank, it is an “I told you so" moment.

But an even more important development has been the surge in imports at a time when manufacturing growth is tepid in the country, as a Mint article on Thursday says.

What this means is that domestic supply chains have been disrupted and imports are driving whatever little growth manufacturers have shown. Any stimulus, monetary or fiscal, during such times would willy-nilly leak towards more imports. No policymaker would want that. With this, indeed, all conducive factors for a rate cut seem to have evaporated.

There is also the argument that a quarter percentage point rate cut wouldn’t achieve much, as the deceleration in growth is rooted more in the comatose private sector investment, which in turn is a result of stressed assets and overleveraged corporate balance sheets. Efforts to reinvigorate investment have begun, with RBI and the banks slowly chipping away at the stressed asset pile. This is not a one-quarter match but rather a longer game that could take the rest of the year to bear fruit.

Until then, even the fall in GDP growth to a three-year low of 5.7% in the quarter ended June may not move the central bank.

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