Finance minister Arun Jaitley on Monday pitched for the Reserve Bank of India (RBI) to cut interest rates to boost growth as inflation, especially food inflation, has moderated in the last few months and global fuel prices have eased to four-year lows.
“Therefore, if RBI, which is highly professional organization, in its wisdom decides to bring down the cost of capital, it will give a good fillip to the Indian economy,” he said at the Citi Investor Summit “India – Poised for Higher Growth” in Delhi on Monday.
Inflation measured by the wholesale price index has fallen to a five-year low of 1.77% in October. The consumer price index, which tracks prices consumers actually pay at shop counters, too, has fallen to a three-year low of 5.52% in October.
This has led to a chorus of demands from industry for a rate cut to spur an economic recovery following two years of sub-5% GDP growth. RBI governor Raghuram Rajan has kept the repo rate, which, in effect, is the base rate that banks use to set their lending rates, unchanged at 8% since January. He will unveil his next policy on December 2.
But RBI is an autonomous body and has full independence on deciding rates. RBI deputy governor SS Mundra, who was also present at the function, said the central bank would revise rates, “but not on popular demand. It changes when there is a clear conviction.”
At a different function Mundra told reporters that RBI will take into account various economic parameters while deciding on the interest rate in its next policy.
At the Citi function, Jaitley assured investors that the NDA government, which has taken several measures to boost growth in the infrastructure sector, would take unveil more reforms in the near future and called for large investments from domestic and foreign investors.
“I hope the Goods and Services Tax Bill and the Insurance Laws (Amendment) Bill would be taken up in the forthcoming winter session of Parliament,” he said.