The Reserve Bank of India on Thursday said it would take into account the decelerating growth and the finance ministry's fiscal consolidation efforts in its coming Budget proposals before formulating its monetary policy review next month.
"We have taken note of the road map for fiscal consolidation put out by the finance minister. And, like everyone else in the country and around the world, we are also looking forward to the Budget, to have a better understanding of how fiscal consolidation could be done on the way forward," RBI Governor D Subbarao told reporters in Guwahati after RBI's board meeting.
On the latest growth estimate of five per cent for the current financial year, he said, "We got to know about the CSO (Central Statistical Organisation) projection. We will take that into account as and when we make our next policy."
A five per cent rate would be the lowest in a decade. The economy grew 6.2 per cent in 2011-12.
On the possibility of a rate cut to boost growth, Subbarao said, "I am unable to comment on rate cuts at this forum."
RBI is scheduled to announce its mid-quarterly review of monetary policy on March 19. To promote growth, it had in its quarterly policy review last month lowered the key lending rate by 0.25 per cent and reduced the cash reserve ratio for banks by the same margin, releasing Rs 18,000 crore or primary liquidity into the system.
To queries on inflation, the governor said, "We have given our assessment (in the policy document on January 29). There is nothing to add to what we said a week ago. Going forward, we will be taking into account further developments and any further data that comes."
The growth projection by the government has caused yields to fall, on expectation of further monetary easing by the central bank at its next review.
"Government bond yields are expected to come down further, and the yield on the 10-year benchmark bond to touch 7.70-7.75 per cent soon, as growth is slowing. IIP (Index of Industrial Production) is expected to slow down, and inflation will also be lesser, raising hopes of a rate cut in the next RBI monetary policy review," said a treasury head of a private sector bank.
The yields on the 10-year bond closed on Thursday at 7.88 per cent, compared to 7.91 per cent yesterday.
"The repo rate is set to go down by at least another 50 basis points due to the slowing growth. If it does not happen in this financial year, it will happen certainly in the next," said the head of fixed income of a fund house.