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Dec 20, 2012, 08.36 AM IST | Source: CNBC-TV18

RBI has taken cautious stand: C Rangarajan

The Reserve Bank of India left policy interest rates unchanged on Tuesday. In an interview to CNBC-TV18, C Rangarajan, chairman, PMEAC says the RBI has taken a cautious stand.

The Reserve Bank of India left policy interest rates unchanged on Tuesday. In an interview to CNBC-TV18, C Rangarajan, chairman, PMEAC says the RBI has taken a cautious stand.

He further says there is a case for easing the monetary policy in January. "Big rate cut seen in January, if WPI fall continues," he asserts.

According to him, inflation is seen settling around 7% by March. He sees FY13 growth rate at 5.7-5.8%.

Below is the edited transcript of his interview on CNBC-TV18.

Q: Are you disappointed that there has been nothing by way of even cash reserve ratio (CRR) in this policy or were you expecting that a rate cut might actually happen in January?

A: I think the Reserve Bank has taken a cautious stand. I think the wholesale price index (WPI) numbers and the retail price numbers showed contradictory trade. But, there is a reiteration of the intention to move towards a more easy monetary policy beginning first quarter of the next year. That has been made somewhat clearer even in the present statement. I think the Reserve Bank wants to follow a policy that can be continued over a period of time. Therefore, it is willing to wait till January.

Q: Now that the Reserve Bank has waited so long for inflation trajectory to peak off, should the January policy cut, which has been reiterated here, be a slightly more forcible one, maybe half a percent will be called for?

A: I think that will also depend upon what happens to the WPI inflation next month, for the month of December. But, certainly all indications are that there is a case for easing the monetary policy in January. If the same trend is reflected for the month of December as well then perhaps a strong easing of monetary policy will be possible.

Q: Would you say that now the RBI would be in a position to even guide for a lower inflation by March 31. They had guided for 7.5 percent by March 31. We are now at 7.24 percent. While a little bit of rise is expected in December and January, given that seminal fall in core inflation, do you think that we should expect revising down of the March 31 inflation forecast?

A: My own forecast earlier was about 7 percent by March 2013. I think we may be heading towards that. There are three more months before the end of March. There could be some pick up in inflation in between. But, I think that it could settle down at around 7 percent by the end of March 2013.

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