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Rise in rates will not impact economy: Montek

According to the Planning Commission the recent hike in short term rates would not put any adverse pressure on the economy.

india Updated: May 04, 2006 18:12 IST

The Planning Commission said on Thursday that the recent hike in short term interest rates would not put any adverse pressure on the Indian economy.

"It is the long term interest rates, which have detrimental impact on the economy and the recent rise was in short term interest rates," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters on the sidelines of an ADB function.

HSBC country head and CEO Naina Lal Kidwai also said there was no upward pressure on interest rates since there is ample liquidity in the system.

So far as HSBC is concerned, it has not taken any decision on revising interest rates on lines of major PSU banks, she added.

Recently, PSU banks like SBI and PNB raised benchmark prime lending rates as well as home loan rates. The move was followed by HDFC as well.

Ahluwalia also said all evidence suggests that states are not spending as much money as they are provided for in the budget. They are spending around 70 per cent of the allocation, he added.

However, the issue should also consider the facts that some orders might have been placed in some states but there are delays in clearing bills which might reflect in unspent amount of money.

First Published: May 04, 2006 18:12 IST