RBI has room to cut rates: Chanda kochhar

A day ahead of the Reserve Bank of India's annual monetary policy announcement, ICICI Bank CEO and managing director Chanda Kochhar said there was headroom for the central bank to cut interest rates as inflation was trending downwards.

"The moderation in inflation can actually have further positive impact on giving the central bank some more headroom in terms of policy rates," she said, addressing a session at the ADB annual meet.

The overall inflation in March fell to 5.96 per cent, much below the RBI estimate.

"Inflation is moderating. The overall inflation has come down below 6 per cent for March 2013 and core inflation has come down to 3.4 per cent. Gradually, we have seen some amount of moderation in inflation," she said.

The RBI is widely expected to cut policy rate and cash reserve ratio by at least 0.25 per cent each to prop up growth in its policy tomorrow.

The economic growth is estimated to have fallen to a decade low of 5 per cent in 2012-13. In the current fiscal, growth is likely to be 6.1-6.7 per cent, as per government estimates.

Referring to short-term challenges for the Indian economy, Kochhar said: "Growth has come down. Fiscal deficit has been high, current account deficit has increased... The twin deficit has restricted policymakers to take action."

The current account deficit touched an all-time high of 6.7 per cent in the December quarter. The fiscal deficit in 2012-13 is estimated to be around 5.2 per cent.

"In order to revive the economy there is a need to revive investment pipeline. In the last 12-24 months a lot of projects have been set up, but most of them have not generated cash flow because of some impediments or the other," she said.

During the medium term, India needs to focus on maintaining attractiveness for capital inflows, she said, adding there was also need to rebalance agriculture output.

"There is also need to make investment in infrastructure and ensuring cash flow and efficiency of infrastructure projects," she added.

Kochhar said capital inflows into the country continue to be large, but there has been volatility.

During 2009-10, India received capital inflows of $24 billion, which improved to $50 billion in the last fiscal.