Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan on Friday said policy rate cuts by the Reserve Bank of India (RBI) will depend on inflation movement, among other factors.
The central bank is due to meet for its next monetary policy review on March 19.
Inflation, as measured by the Wholesale Price Index (WPI), had declined to 6.62 per cent in January. It was 7.18 per cent in December and 7.24 per cent in November. In January last year, the WPI inflation was 7.23 per cent.
"It (policy rate cut by RBI) will depend upon how inflation behaves," Rangarajan said on the sidelines of an event organised by International Chambers of Commerce (ICC) in the national capital.
RBI Governor D Subbarao in the third quarter monetary policy review had
surprised the market by cutting short-term lending rate called repo by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by similar margin to 4 per cent, releasing Rs 18,000 crore primary liquidity into the system.
Rangarajan said RBI will also take notice of action taken by the government on financial year front to contain fiscal deficit.
In Budget 2013, Finance Minister P Chidambaram had said fiscal deficit for the financial year ending March 31, will be 5.2 per cent of the country's gross domestic product (GDP). For the next financial year, the fiscal deficit target has been fixed at 4.8 per cent.
On RBI's decision to allow companies having exposure in real estate to apply for banking licence, Rangarajan said: "I think the RBI, will take a decision finally. It is a question of deciding who are fit and open... Who will they
(RBI) give licence will depend upon number of factors."
With inputs from PTI
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