Mumbai: Notwithstanding inflation concerns, the Reserve Bank of India (RBI) may go in for a rate cut on Tuesday to promote growth, which according to a central bank-sponsored survey could slip to 5.7 per cent in the current fiscal.
"Monetary policy needs to be cautious in the interim, focusing on inflation while using the available space to support growth to the degree it can," RBI said in its macroeconomic and monetary development review for July-September quarter.
Ahead of its half-yearly monetary policy review on Tuesday, the RBI said that the Professional Forecasters has lowered the GDP growth projection to 5.7 per cent from 6.5 per cent for the current fiscal. Besides, average wholesale price-based inflation forecast has been revised upwards to 7.7 per cent from 7.3 per cent.
RBI said government's reform efforts are in the right path but added that immediate implementation and continued measures are needed to bring economy back to growth path. "A credible fiscal consolidation strategy is now on the anvil but needs to be backed by further measures," RBI said.
Earlier on Monday, Finance Minister P Chidambaram unveiled a five-year roadmap for fiscal consolidation wherein he projected to bring down fiscal deficit to 3 per cent of GDP by 2016-17 from 5.3 per cent estimated in the current fiscal. Economic growth fell to a nine-year low of 6.5 per cent in 2011-12. The growth rate in the April-June quarter of 2012-13 fiscal was 5.5 per cent.
"As macro-risks from inflation and twin deficits recede further, that could yield space down the line for monetary policy to respond more effectively to growth concerns," RBI said.
It said the global growth prospects, both in advanced and emerging economies, have weakened and the euro zone troubles have affected business confidence and caused deceleration in global trade.
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