Scope for cut in key rates as inflation easing

Secretary Department of Economic Affairs, Arvind Mayaram on Tuesday articulated the need for a rate cut by the Reserve Bank of India on the back of easing inflation as it would help in furthering growth.

“There is scope for easing of monetary policy to boost growth in view of moderation in WPI -based inflation. Inflation numbers have also come down so there is certainly a case for giving further impulses for growth,” Mayaram told reporters here.

Regarding a possible rate cut in the upcoming monetary policy, the secretary said “the central bank (RBI) will definitely factor into account various developments and make an assessment of the macro economic conditions.”

RBI is scheduled to announce its mid-quarter review of monetary policy on March 19 and there is a widespread expectation that it will cut policy rates to boost growth.

In its last monetary policy the RBI had slashed the key interest rates by 0.25 per cent and injected `18, 000 crore additional liquidity into the system to perk up growth through reduced cost of borrowing.

He also said “We are going to see some growth impulses and I am confident that we will also have further good news.”

Reacting to IIP numbers, he said “there are signs that economic slowdown is bottoming out.”

“The IIP numbers for January suggested some recovery with the growth rate inching up to 2.4% against one per cent in the corresponding month a year ago,” Mayaram added.

The economic growth rate meanwhile fell to a decade low of 4.5 per cent in the October-December quarter. The CSO has estimated the growth rate for the current fiscal at 5 per cent.