"I would say that decline in WPI is higher than what was expected. It gives greater space for monetary authority to act," he said while unveiling the review of economy for 2012-13.
Wholesale Price Index for the month ended March moderated to 3-year low of 5.96 per cent against Reserve Bank's projection of 6.8 per cent.
However, he said, inflation continues to remain high, but there are definite signs that headline WPI inflation is coming down.
"Non-food manufacturing inflation remains around the comfort zone.
“As inflation comes down, it will create more space for monetary policy to support growth," he said.
Giving projections for the next fiscal, Rangarajan said, "the headline WPI inflation is expected to be around 6 per cent, with primary food inflation around 8 per cent, fuel at about 11 per cent and manufactured goods at around 4 per cent."
RBI Governor D Subbarao will announce the Monetary Policy Statement 2013-14 on May 3.
In its last policy review in March, RBI slashed short- term lending rate by 0.25 per cent to 7.5
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