RBI hints at policy easing as growth falls below 5.8 %

The Reserve Bank of India (RBI) today hinted at a pro-growth approach in it monetary policy review due tomorrow as it expects the country's economic growth during the 2012-13 financial year to fall below the 5.8 per cent projected earlier.

With business confidence continuing to be subdued and inflation levels likely to fall below the projected 7.5 per cent, RBI said, ''monetary policy needs to be calibrated in addressing growth risks as inflation turns sticky.''

RBI expects the wholesale price-based inflation to average 7 per cent in the 2013-14 financial year against 7.5 per cent in 2012-13.

''Growth in 2012-13 is likely to fall below the Reserve Bank's baseline projection of 5.8 per cent. However, output gap may start closing in 2013-14 although at a slow pace on the back of some revival in investment and consumption demand,'' RBI said.

Although inflation is likely to moderate below RBI's base-line projection of 7.5 per cent, the central bank said, ''Suppressed inflation continues to pose a significant risk to the inflation in 2013-14.''

The combined pressure of inflation and wage increases remains a source of concern, RBI said.