Moderation in inflation could prompt RBI to cut rates: Kochhar

The RBI is widely expected to cut policy rate and cash reserve ratio by at least 0.25% each to prop up growth in its policy tomorrow

A day ahead of the Reserve Bank of India’s (RBI) monetary policy review, ICICI Bank’s CEO and Managing Director Chanda Kochhar on Thursday said moderating inflation would give the central bank more leeway to cut the policy rate.

“The overall inflation for march 2013 has come down below six per cent and the core inflation has become 3.4 per cent. Gradually, we have seen some amount of moderation in inflation. And this moderation in inflation can have further positive impact on giving the central bank some more headroom in terms of policy rates,” she said at a seminar on capital flows at the annual meeting of Asian Development Bank here.

There are wide expectations that RBI would cut the policy rate (repo) to perk up growth rate.

The overall inflation in March fell to 5.96 per cent, much below RBI’s estimates. However, the retail-price inflation remained in double digits at 10.39 per cent in the month.

The economic growth is estimated to have fallen to a decade low of 5 per cent in 2012-13. In 2013-14, the growth is likely to be between 6.1-6.7 per cent, according to government estimates.

The government is looking for green shoots of the economy, but these are not visible as yet.

Widely-tracked HSBC purchasing managers’ index (PMI) was released on Thursday and stood at 51 points for April 2013, the lowest level since November 2011.