Department of Economic Affairs Secretary Arvind Mayaram feels that Reserve Bank of India (RBI) may reduce policy rates before March 2013.
Amid high interest rate regime impacting economic activities, Mayaram said the RBI is "fully cognizant" of the need now to step up growth.
In order to prop up investment sentiments, the government announced a slew measures including raising price of diesel, liberalising FDI norms for multi-brand retail and aviation.
Speaking to a leading media, Mayaram suggested that RBI be more "benevolent" in its monetary policy stance in wake of recent steps to help the economic growth.
Mayaram expects inflation to start moderating sometime in January and by March the economy could see full impact of moderation in inflation with the steps are being taken. RBI would be comfortable if the inflation comes down to 5-5.5 per cent.
As per the latest data released, inflation in September shot up to 7.81 per cent from 7.55 per cent in the previous month.