India's central bank on Thursday said the space for monetary easing in 2013-14 remains "very limited" due to high inflation.
A day before rate decision, the Reserve Bank of India said, "In view of macro-financial risks that stay significant, headline inflation remaining above the threshold and consumer price inflation remaining high, the space for action for 2013-14 remains very limited."
In the Macroeconomic and Monetary Developments in 2012-13, the central bank said slow-paced recovery is likely later in 2013-14, contingent on improved governance and efforts to resolve structural bottlenecks.
"If some of the risks come to fore, policy re-calibration may become necessary in either direction," it said.
The RBI is expected to cut interest rates on Friday to revive the economy after growth hit a decade-low in the fiscal year 2012-13. The repo rate is expected to be lowered to 7.25 percent from 7.50 percent and the reverse repo rate to 6.25 percent from 6.50 percent.
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