She adds that tackling lower growth via interest rate cuts will not work to stimulate the economy right now, as such a move would result in further weakening the Indian rupee which has already fallen to record lows against the U.S. dollar this year.
“Growth is weak and it’s going to stay weak. This trap that has emerged is because of slowing structural growth – a situation that can’t be dealt through rate cuts by the central bank,” said Suryanarayanan.
In April, the Reserve Bank of India (RBI) cut rates by an unexpectedly sharp 50 basis points as growth concerns took center stage.
Eskesen agrees that the central bank will have very limited room to ease monetary policy at its next meet on June 18. “The lingering inflation pressures suggest that monetary policy cannot be eased aggressively. Instead, traction on deep-rooted structural reforms is needed to significantly improve the inflation-growth trade-off,” he said.
By CNBC's Ansuya Harjani
Page 3 of 3 | Prev Page