Declining inflation will raise scope for further rate cuts: Chidambaram

Finance Minister P Chidambaram remains optimistic that declining inflation would increase the scope for rate cut by the Reserve Bank of India.

Though the Reserve Bank of India (RBI) cut the repo rate by 0.25 per cent to 7.25 per cent, it stuck to its cautious stance in its monetary policy review. The central bank warned that there remains little room for further easing, citing significant upside risks to inflation.

"Let's accept what has been done today and let us see what the future holds", Chidambaram said while commenting on the RBI's monetary policy for the current financial year.

"RBI reduced policy rates by 25 basis points. It also announced rather liberal OMO (Open Market Operations). If the inflation trend down further...that will decide scope for further policy action", Chidambaram said.

The central bank pegged the growth rate for current fiscal at 5.7 per cent, much below the Finance Ministry's projection of 6.1 to 6.7 per cent. (With Agency Inputs)