The Reserve Bank of India (RBI) on Monday said inflation above 7% was still high, signaling there might be fewer rate cuts going forward if inflation remains at elevated levels.
"If you take the macroeconomic context today, we will find that growth has moderated, inflation has
come off from the peak but even at 7-plus percent is still high," said D Subbarao, governor, RBI.
While retail or consumer-price based inflation jumped to over 10% in December, headline inflation declined to a three-year low to 7.18% during the month.
The RBI had slashed the repo rate by 0.25 percentage points in January, but refrained from spelling out further rate cuts due to concerns about the current account deficit (CAD) -the gap between forex earned and forex spent - and inflation flaring again in the later half of 2013.
Subbarao also cautioned that the country was headed for the highest-ever CAD this fiscal, after it rose to 5.3% of GDP (gross domestic product) in the second quarter.