Supporting the government's recent reform push, Reserve Bank today said measures like opening up the FDI in some sectors and moves towards fuel price deregulation should put the economy back on the high growth trajectory and spur investment inflows.
Various measures including liberalisation of FDI in retail, aviation, broadcasting and insurance, deferment of general anti-avoidance rules (GAAR), reduction in withholding tax on overseas borrowings by domestic companies and setting up of the Cabinet Committee on Investment... should spur investment," the RBI said in its third-quarter policy review.
These policy actions could help engender stable macroeconomic conditions and return the economy to its high growth trajectory, it added.
PM adviser Rangarajan says more interest rate cuts possible
The Reserve Bank further said that measures like progressive deregulation of administered fuel prices, along with adherence to the path of fiscal discipline, can help the government bring down the current account deficit as well as the fiscal deficit to manageable levels.
RBI Governor D Subbarao in the third quarter monetary policy review 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.
While repo rate cut will reduce the cost of borrowing for individuals and corporates, CRR which is the portion of deposits that banks have to park with RBI, would improve the availability of funds.
RBI's rate cut will help investment: Ahluwalia
The RBI, however, has reduced the growth projections for the current financial year to 5.5 per cent from its earlier estimate of 5.8 per cent.
On inflation, it moderated the rate to 6.8 per cent for March-end from earlier projection of 7.5 per cent.