HIGHLIGHTS-India cbank cuts rates for first time in 9 months

MUMBAI, Jan 29 (Reuters) - India's central bank lowered its key policy rate
as expected for the first time in nine months to support an economy set for its
slowest growth in a decade, but signalled there was less room for aggressive
cuts in future due to concerns over inflation.
Following are highlights from the monetary policy statement:

POLICY MEASURES
* Cuts repo rate by 25 basis points to 7.75 percent.
* Reverse repo adjusted to 6.75 percent.
* Cash reserve ratio cut 25 basis points to 4.00 percent
effective fortnight beginning Feb. 9.
* Marginal Standing Facility rate adjusted to 8.75 percent.
* Bank rate adjusted to 8.75 percent.

POLICY STANCE
* Expectations of rangebound inflation in 2013/14 provides space, albeit
limited, for policy to give greater emphasis to growth risks.
* It is critical that even as the monetary policy stance shifts further
towards mitigating growth risks, the objective of containing inflation and
anchoring inflation expectations is not de-emphasised.
* CRR cut to infuse 180 billion rupees ($3.4 billion) into the banking
system.
* Financing high current account deficit with volatile capital flows
potentially threatens macro-economic, foreign exchange rate stability.

FORECASTS
* Baseline GDP growth forecast for 2012/13 cut to 5.5 percent from 5.8
percent earlier.
* Baseline wholesale price index inflation projection for March 2013 cut to
6.8 percent from 7.5 percent.
* Cuts M3 projection to 13 percent from 14 percent earlier.
* Retains credit growth projection at 16 percent.

INFLATION STANCE
* Monetary policy will continue to condition, contain inflation perception
in 4.0-4.5 percent range.
* The moderation in inflation conditions provide the opportunity for
monetary policy to act in conjunction with fiscal and other measures to stem the
growth risks.
* Still high input costs and wages continue to impart upward pressures on
prices.
* Further moderation in domestic inflation going into 2013/14 is likely to
be muted as the correction of under-pricing of administered items is still
incomplete and food inflation remains elevated.

GROWTH, ECONOMY
* More reforms crucial for raising potential growth path in medium term.
* Critical now to arrest loss of growth momentum without endangering
external stability.
* Global growth recovery likely to be anaemic and is also fraught with
significant downside risks.
* Sluggish external demand continues to inhibit improvement in services.
* New investment demand, which should be the key driver of the upturn,
continues to be weak.
* While the series of policy initiatives by the government has boosted
market sentiment, it will take some time to reverse the investment slowdown and
reinvigorate growth.
* Investment activity has been way below desired levels and consumption
demand has started to decelerate.

BANKING SECTOR
* Banks should be discerning in loan decisions, ensure adequate credit flow
to productive sectors.
* Risk aversion in banking system due to concerns of asset quality
constraining credit flow.

* Full text of statement: here
* Analyst comments on policy statement:
* The India Online special page on the RBI policy review is live here
($1 = 53.7 Indian rupees)

(Compiled by Neha Dasgupta; Editing by Ranjit Gangadharan)