The Hindu Business Line : ‘Interest rates may not come down soon’

Chennai, Sept. 24 Noted economist and Member of Parliament (Rajya Sabha), Dr C. Rangarajan, has said he did not see any scope of interest rates softening in the near future, though they may not harden further.

Any softening of interest rates will have to wait until the inflation is tamed, Dr Rangarajan said, addressing the Annual General Meeting of the Southern India Chamber of Commerce and Industry (SICCI).

He said that the global financial meltdown would have only a limited impact on the Indian economy, in terms of a possible slowdown of export of both goods and services (read IT) and might make it difficult and expensive for companies to borrow abroad.So far there has been no impact on exports, Dr Rangarajan observed.

He pointed out that till July, exports had gone up by 20 per cent. But there might be a slowdown in the coming months.

He said that the distressed financial markets in the developed countries would slow down capital flows into India, “but that is not a bad thing for India”. He pointed out that excessive capital inflows was principally the problem in the last few years, adding to the inflation.

Dr Rangarajan, who was until recently the Chairman of the Prime Minister’s Economic Advisory Council, said that he saw no threat to the Indian economy because of the turbulence in the global financial market.

On even keel

Dr Rangarajan said that the Indian economy is on an even keel on all macro economic parameters. He said that the savings rate (34.8 per cent of GDP in 2006-07) is very healthy, leading to an investment rate of 36 per cent.

Warning that any problems arising out of a contagion effect should not be used as an excuse for pulling away from globalisation, he said, “more than any other developing country, India is in a position to wrest significant gains from globalisation.”

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