Subbarao says more rate cuts if CAD, inflation go down

He gave an explicit guidance on the monetary policy stance, saying further easing depends on a significant decline in CAD and inflation, which would be more than RBI's expectations.

Subbarao, however, did not specify a fiscal-end RBI estimate on CAD like it does on growth and inflation.

On inflation, he said the number will start going up post March on base effect and the impact of fuel price increases.

In his policy statement released this morning, Subbarao had said the decline in headline inflation provides a limited space for the monetary policy to give a greater emphasis to the growth risks.

At the interaction, Subbarao rejected the criticism that the apex bank took a divergent stance in the 'Macroeconomic and Monetary Developments' report released on the eve of the policy review and the policy document.

"I read them quite consistently...if you read any inconsistency there, that was not deliberate," he said.

"The message we are trying to give is that as much as there is some space, its going to be limited and we are going to use it with a lot of judgement on both the timing and the quantum," Subbarao said.

Subbarao said that consumption, "the last bastion" in the growth story, has also started crumbling down. "But it will get revived only when people see their incomes going up and not through rate cuts", he added.

"The marginal propensity to consume out of a reduction in interest rate is lower than the marginal propensity

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