The finance ministry wants the Reserve Bank of India (RBI) to switch its policy stance, with growth concerns occupying centre stage and inflation showing signs of moderating.

A ministry official said monetary tightening had hurt growth and the central bank should have paused earlier than December 2011. The RBI should cut policy rates to give a push to rate-sensitive sectors, the official added.

While bankers are not expecting a repo rate cut at the policy meet on January 24, the ministry thinks it would be needed to spur investment and growth.

Finance Minister Pranab Mukherjee has also admitted the anti-inflation monetary and fiscal policy stance has impacted consumption and investment growth.

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"Concerns about slowing growth are likely to weigh on policy-making. We see a risk that GDP growth will approach six per cent in H2-FY12, with recovery delayed until H2-FY13. Monetary policy easing is likely to bring a cyclical upturn in investment, but policy bottlenecks will need to be removed to sustain the rebound," said Samiran Chakraborty, regional head of research, India, Standard Chartered Bank.

Standard Chartered expects the RBI to reduce CRR by 50 bps and undertake an additional Rs 35,000-40,000 crore (Rs 350-400 billion) of open market operations to address the liquidity shortfall in the near term.

It expects 150 bps of repo rate cuts in FY13. One bp (basis point) is one-hundredth of a percentage point.

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Unlike previous occasions, expectations are divided on what the central bank's stance should be. While many economists see a pause on the rate front as core inflation is still high, market participants expect relief from the high cost of liquidity.

The RBI has hiked key policy rates 13 times between March 2010 and October 2011 before it hit the pause button in the December review.

RBI governor D Subbarao met Mukherjee on Friday to discuss the prevailing macroeconomic situation, which would be the decisive factor.

Ratings agency Moody's also expects a slowing economy may prompt the central bank to act on the rate front earlier than expected earlier.

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"We were homing in on a March rate cut, but the latest inflation cooling may give the RBI sufficient reason to move before then. The Indian economy is slowing sharply and with inflation coming off its peaks, there's no reason for the RBI to continue sitting on their hands," Moody's said in a report. "Look for an initial rate cut in February," it added.

According to J Moses Harding, executive vice-president at IndusInd Bank, the expectation is of a 0.5 per cent cut in cash reserve ratio and a 0.25-0.5 per cent reduction in the policy rate.

"It is a contrarian view at this stage and it is fair to expect RBI to address serious concerns of other stakeholders of the market," said Harding.