RBI may ease rates further: Chief Economic Advisor

Davos: Lauding RBI's role in helping bring down inflation, Chief Economic Advisor Arvind Subramanian said the central bank may further ease the interest rates as improvement on price front has opened the space for monetary easing. "The way I view is that RBI has a mandate to bring down inflation and keep it low and given the inflation has been  coming down, that opened up the space for monetary policy easing and RBI has begun that," said Subramanian, who was here to attend the World Economic Forum Annual Meeting. 

"The RBI's own statement says that this is not just a change in rate, but a shift in its monetary policy stance provided inflation remains low and there could be more easing," said Subramanian in an interview at the WEF summit that ended this weekend. A number of business leaders and bankers, including ICICI Bank's Chanda Kochhar and Kotak Group's Uday Kotak, also said at the WEF that the RBI may look at further easing of rates as inflation appears to be under control.

Subramanian also said the government is committed to making sure that the taxation is not an extra burden forforeign investments of all kinds. On ease of doing business, he said, "There are also issues like land laws, labour laws and reforms have been happening on those fronts.  "We will have to wait for the World Bank to measure how  these efforts have helped in terms of ranking. Besides, the real measure will be seen in terms of actual investments that would flow in."

On January 15, the RBI had cut the policy rate by 25bps a few weeks ahead of its regular monetary policy meeting, which is scheduled to be held on February 3. RBI Governor Raghuram Rajan lowered the benchmark repurchase rate to 7.75 per cent from 8 per cent, the first reduction since May 2013.

The RBI rate cut follows decline in inflation as well as the commitment of the government to stick to the fiscal deficit target of 4.1 per cent of the GDP in the current financial year.