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Finance Minister Arun Jaitley on Monday expressed hope of further reduction in interest rates that will help make the economy more competitive. “Interest rates have been on a downward trajectory in the past one year. The government has stuck to its fiscal deficit commitments and inflation has been under control. I do hope that this movement will continue in order to make our economy more competitive with more competitive interest rates,” he said at the CII annual meeting.
RBI Governor Raghuram Rajan will announce its policy on Tuesday. With manufacturing sector performance still below par, industry and policy makers have been pitching for a further cut in rates to boost growth. The RBI has cut the repo rate by 125 basis points since January 2015. Talking about the proposed tax on Provident Fund in the Budget that he later withdrew, the Minister said that high interest rates will make the economy sluggish. “In the long term, interest and deposit rates have to come down,” he said while noting that there is a need for more debate on the issue.
He stressed that the debate on crucial economic issues, like interest rates, should move in the right direction in India, which is a “large and noisy democracy”.
While stressing that it is in the interest of the country to have a large and booming private sector, Jaitley said industry leaders must be credible and ethical when dealing with bad loans.
“Indian industry is also fighting a major battle for its own credibility. Some recent events haven’t added to their credibility,” he said, in an allusion to Kingfisher Airlines that has defaulted on loans of ₹9,000 crore and its chief Vijay Mallya moving to the UK.
Pointing out that non-performing assets are often the result of an adverse business climate, the Finance Minister, said, “When the cycle reverses, the NPAs can also be reversed but the approach of the leaders of the industry will certainly have to be always positive and ethical because it is that approach which is going to add to their credibility.”
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