Chief Economic Advisor Arvind Subramanian today said there is more scope for lowering of interest rates by the RBI as inflation is under control.
“There is scope for easing monetary policy in two ways, one to inject liquidity to bring it in line with the current policy rate and second is given our inflation projections and assessment going forward, perhaps there is more scope for easing the policy rates as well,” he said.
Talking to reporters after the release of the Economic Survey 2015-16, he said retail inflation for next fiscal is expected to be between 4.5-5 per cent, which is below RBI’s projection.
He said inflation would be low next fiscal on account of minimal effect of 7th Pay Commission, below potential growth, and excess capacity, besides stress on private sector and deflationary situation prevailing globally.
The Consumer price index-based retail inflation stood at 5.69 per cent in January. Between April-January, the average CPI inflation stood at 4.9 per cent.
The Reserve Bank, which had set a retail inflation target of around 6 per cent by January 2016, expects the rate of price rise to be around 5 per cent by the end of 2016-17 financial year.
The RBI last year cut policy rates in four phases, cumulating to 1.25 per cent, including a 0.50 per cent cut at the October meeting.