he said adding this could be done by one time increase followed by monthly hikes of a lower order.
As regards rupee, Rangarajan hoped "at the current level (it) is well corrected. Stability is returning to the foreign exchange market. As capital flows return, and as CAD begins to fall, this tendency will strengthen".
However, he added the current stance of monetary policy should continue until stability in rupee is achieved.
The rupee has lost over 20 per cent since April and had touched a life time low of 68.86 to a dollar on August 28. It is currently trading at 63.44 to a dollar.
Rangarajan said March end WPI inflation will be at 5.5 per cent as rupee depreciation could harden commodity prices.
The retail inflation in August stood at 9.52 per cent, while the WPI numbers in July was at 5.79 per cent.
Much of the monetary policy easing would depend on developments in the forex market, Rangarajan said adding "controlling CAD remains main concern at present".
The trade deficit is projected to come down to around USD 185 billion in 2013-14, from USD 195.7 billion in 2012-13.
Elaborating on the growth prospects, Rangarajan hoped that the economy would perform better in the second half of 2013-14 as the impact of measures taken by the government over the last six months would become visible.
The GDP growth in April-June quarter fell to a four year low of 4.4 per cent.
The Cabinet Committee on Investment (CCI), Rangarajan said, has cleared 209 projects worth Rs 3.84 lakh crore.
Following are the highlights of the Economic Outlook 2013-14 released by Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan today:
* GDP growth for 2013-14 lowered to 5.3%, from 6.4% in April
* Growth likely to pick up in the second half of 2013-14
* Agriculture growth pegged at 4.8%, industry at 2.7%
* Services growth to decelerate to 6.6%, from 7.% in 2012-13
* March-end inflation projected at 5.5%
* Current Account Deficit (CAD) main concern, may come down to USD 70 billion or 3.8% of GDP
* Trade deficit projected at USD 185 billion
* Gold imports seen at USD 38 billion
* Net capital inflows to come down to USD 61.4 billion from USD 89.4 billion
* Rupee at current level is well corrected, will strengthen with improvement in CAD
* Containing fiscal deficit at 4.8% of GDP a challenge
* Expenditure compression, subsidy restructuring necessary to avoid fiscal slippages
* Current monetary policy stance