The Reserve Bank and the government must work in tandem to bring down interest rates, finance minister P Chidambaram said, while emphasising that high rates hurt everyone.
"... fiscal policy and monetary policy should work in tandem to stabilise the exchange rate as well to bring
down interest rates," he said in an interview to Bloomberg TV in Tokyo.
Chidambaram is in Tokyo to participate in the IMF-World Bank meetings.
High interest rates "hurts everyone", he said. "It hurts the big industry which has to borrow large amounts of money.
Its hurts the middle class ... the person who wants to buy home or two-wheelers or cars. EMI goes up," he added.
There is a need to have a balance between the interest of savers and borrowers, he said, adding only depositors benefit from high interest rates.
"Rates must come down and if the fiscal policy steps that we are taking encourage the central bank to take monetary policy action which will result in lower interest rates, I think that will be good," he said.
Chidambaram's statement comes ahead of the Reserve Bank of India's (RBI) second quarterly review of the monetary policy on October 30.
The short-term lending rate or repo rate has been kept unchanged at 8% since April 2012 by RBI.
Answering questions on reforms, Chidambaram said, "We intend to take some more steps on insurance, banking and some more steps on infrastructure side which is under preparation. We will take these steps in next few weeks."
The government has taken a host of reform initiatives since mid-September, like allowing FDI in multi-brand retail chain and relaxing foreign investment norms for aviation and broadcasting sector. Besides, the government has also allowed 49 per cent investment in insurance and pension sector.
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