New Delhi, Jan 13 (IANS): The conditions are turning favourable for rate cuts in India and the Reserve Bank of India’s (RBI) easing cycle is likely to begin from February, according to a report on Monday.

The central bank’s neutral policy stance gives it flexibility to cut rates.

Food inflation, the main roadblock for rate cuts, is expected to ease given healthy agricultural production, according to a Crisil Intelligence report.

While monetary easing is underway in several key economies, uncertainty regarding the extent of rate cuts has risen. Trump’s victory brings with it expectations of tariffs increasing inflationary pressures and tax cuts adding to fiscal stress

In India, domestic financial conditions improved marginally on-month in December. The CRISIL Financial Conditions Index (FCI), an indicator capturing parameters from India’s major financial market segments, rose to 0.5 from 0.4 in November.

Foreign portfolio investors (FPI) returned to Indian markets in the first half of December as US treasury yields cooled.

“This buoyed equities and supported softer domestic yields. Falling crude prices augured well for inflows into oil importing economies such as India,” according to the report.

Domestic liquidity tightened despite the RBI cutting the cash reserve ratio (CRR) on the back of increased currency demand during the festival season and tax outflows.

Tighter liquidity pushed up money market rates. An uptick in bank credit growth provided some support to domestic liquidity.

Indian equities gained for the first time in December in three months. The benchmark BSE Sensex and Nifty 50 rose 1.5 per cent and 1.1 per cent on average, respectively.

The indices gained in the first half of the month driven by expectations of higher government spending and positive global cues such as softening crude oil prices.

The NSE volatility index (VIX) declined to average 14.0 in December from 15.3 in November, implying reduced volatility, said the report.