Five reasons why RBI should cut interest rates

Goldman Sachs says so: The investment bank is perhaps the outlier in expecting the Reserve Bank of India (RBI) to cut its key interest rate by 25 basis points.
November inflation dropped unexpectedly, but the trend may reverse: Data on Friday showed the wholesale price index rose 7.24 percent from a year earlier in November, below expectations for a rise of 7.6 percent. Core inflation was 4.5 percent. The central bank should seize on this opportunity and cut rates, some analysts said. That's because the benefit of a stronger rupee may reverse in coming months.
Economic growth has stalled: The index of industrial production (IIP) grew 8.2 per cent annually in October, highest in more than a year, but economists said the rebound was largely due to a low base a year earlier. The country's economy grew 5.3 percent from a year earlier in the July-September period and the projection for the second half (5.7 - 5.9 per cent) is well below the budgeted forecast of 7.6 per cent.
India is the only BRIC country in which lending rates are stuck at their 2008 peak, according to Bank of America Merrill Lynch. India's growth-inflation tradeoff is not bad as it is likely lamented to be. Inflation is 1.3-times of growth, better than Brazil's 2.4-times and Russia's 1.7-times.
No threat from quantitative easing: Last week, the Federal Reserve announced another round of quantitative easing. The U.S. central bank will buy $85 billion worth of bonds per month until the unemployment rate falls below 6.5 per cent. Bank of America Merrill Lynch does not expect QEIII to be as inflationary as QEI and QEII. That's because agro markets, like edible oils, raw cotton and sugar, in which Indian and international prices are closely integrated, are seeing reasonably good supply, it says.