Subbarao meets PM, FM ahead of RBI policy

Ahead of the monetary policy for 2012-13 on Tuesday, Reserve Bank of India (RBI) Governor D Subbarao on Saturday met Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee to discuss the macroeconomic situation of the country.

Amid slower economic growth and declining industrial production, the industry is expecting the central bank to cut the key policy rate by 25 basis points when it announces the policy on April 17.

The industry wants the RBI to signal easing of the policy regime to help spur investment at a time when inflation has started showing signs of easing. Inflation data for the month of March will come on Monday, a day before the RBI policy.

After remaining persistently high for about two years, inflation slowed to 6.95 per cent in February.

Meanwhile, economic growth also slowed to 6.1 per cent in October-December 2011. India’s GDP growth is estimated at 6.9 per cent in 2011-12 and expected to be 7.6 per cent in 2012-13. Industrial output showed a growth of 4.1 per cent in February, continuing its dismal performance. Besides, January figures were drastically revised downwards to 1.1 per cent from earlier 6.8 per cent.

It would be interesting to know RBI’s projections in the April 17 policy for economic growth and inflation in the context of Asian Development Bank pegging India's growth and average inflation at seven per cent.

In order to tame inflation, the RBI increased the repo rate 13 times over the last two years, taking it from 4.75 per cent in March to 8.5 per cent. As far as the key policy rate is concerned, it maintained a status quo in the last three reviews. In the last review, it hinted at reversal of monetary tightening.