the outlook for the agricultural sector is contingent on the timely arrival and spread of the monsoon.
"Easing of domestic supply bottlenecks and progress on the implementation of stalled projects already cleared should brighten up the growth outlook, as would stronger anticipated export growth as the world economy picks up," he said.
Rajan said the primary objective is to improve the transmission of policy impulses across the interest spectrum and improve liquidity in the system.
"The term repo has evolved as a useful indicator of underlying liquidity conditions. It also allows market participants to hold liquidity for a longer period...evolving market-based benchmarks for pricing various financial products," he said.
The RBI will continue to monitor liquidity conditions and ensure adequate flow of credit to the productive sectors.
"Liquidity conditions have tightened in March, partly on account of year-end Ďwindow dressingí by banks, though an extraordinary infusion of liquidity by the Reserve Bank has mitigated the tightness," he said.
The Reserve Bank will propose measures to reduce such practices, he added.
The second bi-monthly monetary policy statement is scheduled to be announced on June 3.