India considering quantitative easing

India looks to cut interest rates to prod growth.

The Reserve Bank of India, the central bank, will most probably ease monetary policy in January 2013 to help revive the sputtering Indian economy. Governor Duvvuri Subbarao said pressure has been mounting for lower interest rates.

RBI last week warned it may implement a quantitative easing in the first quarter of 2013.. It left interest rates on hold, but cut the cash reserve ratio for banks.

"If the growth and inflation trajectories play out as we expected, we would act according to our guidance," Subbarao said.

"We would assess the situation in January and try and act according to our guidance. Should the situation be different, then we will have to defer until March."

Subbarao did not specify whether the central bank will implement the quantitative easing either by cutting interest rates or lowering bank reserve requirements. Analysts, however, believe the easing is more likely in January than March.

Economic growth has fallen to 5.5%, far below the 9% growth before the 2008 global financial meltdown. RBI expects inflation to ease in the first quarter of 2013, from a 10 month high of 7.8% in September.

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