Rangarajan welcomes RBI policy

C Rangarajan, Chairman of Prime Minister’s Economic Adivsory Council (PMEAC) has welcomed the RBI's decision stating, "I think it is a good decision they have taken to reduce the policy rate by 25 bps".

Speaking at the RBI's staff quarters in Chennai today, Rangarajan said, "Going ahead, what they will do depends on how inflation will behave. There is a possibility of further easing if inflation really goes down. But at this point one has to be cautious, There are many adverse factors operating in the system."

He said that further action will depend on how economy is evolving and how prices move.

"I think 5% inflation is a goal towards which the RBI would like to move. The space available to monetary authorities will entirely depend on how inflation behaves. If inflation moves in the direction of touching 5% I think there would be greater space. On the other hand if inflation remains sticky more likely retail inflation then space becomes limited," he added.

Rangarajan also said he believes that many of the actions the government has taken since September last year, action taken during the Budget and post-Budget will have full effect during the course of the year. "We could see in the 2nd quarter of the current fiscal some improvement in the behaviour of the economy. Growth rate in current fiscal will be in region of 6.4%," he said.