Look forward to good news on RBI policy stance in January: Raghuram Rajan

The government's Chief Economic Advisor Raghuram Rajan on Tuesday said he'll look forward to the good news of easing policy stance from the Reserve Bank of India (RBI) in January, soon after the central bank announced that it sees room for a rate cut early next year.

In its mid-quarter monetary policy review on Tuesday, the central bank held back from cutting interest rates or cash reserve ratio, but sounded hopeful of easing its monetary stance in January.

"In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards", RBI Governor D Subbarao said in the mid-quarter monetary policy review.

The RBI is slated to announce the third quarter policy review on January 29.

Commenting on the policy, Rajan said: "I think its good that RBI sees that there is room to ease. And clearly they are taking a decision keeping in mind that their main job is combating inflation. I look forward to good news in policy (January)."

The RBI in its review on Tuesday said the global economy has shown some signs of stabilisation although the situation remains fragile.

It said that while activity is picking up in the US and the UK, near-term prospects in the euro area are still weak and there is no clarity as yet on how the US 'fiscal cliff' might be managed.

"While several emerging and developing economies are gradually returning to higher growth, weak external demand and contagion risks from advanced economies render them vulnerable to further shocks," the RBI said.

On the domestic front, it said, there are some incipient signs of pick-up though growth remains significantly below its recent trend.

The industrial output growth bounced back to 8.2 per cent in October, 2012, against a contraction of 5 per cent in the same month last year. The Indian economy grew by 5.4 per cent in the first half (April-September) of the current financial year, against 7.3 per cent in the corresponding period last year.

The RBI in its second quarter policy review had projected the GDP growth for the current financial year at 5.8 per cent. The finance ministry in its mid-year analysis has pegged the growth estimate between 5.7-5.9 per cent for 2012-13.

With inputs from PTI