A day ahead of Reserve Bank of India’s monetary policy, finance minister Arun Jaitley said that high interest rates can make the economy sluggish. “The government has stuck to fiscal deficit commitments and inflation has been under control. Therefore, I do hope that this movement will continue in order to make our economy more competitive with more competitive interest rates,” he said while addressing the CII Annual session. The Reserve Bank is scheduled to hold its first bi-monthly monetary policy review for 2016-17 on Tuesday. [related-post] Terming India as a “large and noisy democracy”, Jaitley said that the debate on crucial economic issues like interest rates should move in the right direction in India. “Take for instance responsible political groups taking a position to support high interest rates for something which is absolutely capable of making us a sluggish economy,” Jaitley said. The debate on issues should move in the right direction, which will “enable Indian society as the world’s largest democracy and an aspirational democracy to add maturity to that debate,” he said. In the long run, deposit and lending rates should come down in order to make the economy more competitive, he said. “The movement in last one year, as far as the interest rates have been concerned, has been downwards,” Jaitley said. With the recent cut in small savings rate, which became effective from April 1, the Reserve Bank of India is expected to cut rates in Tuesday’s monetary policy review. The Reserve Bank will also get comfort from lower inflation, with inflation based on CPI hovering in the range of 5-6 per cent over the last few months and wholesale price index-based inflation being in the negative zone for past 16 months.
