1. Ahead of RBI monetary policy review, FM bats for rate cut to boost investments & growth

Ahead of RBI monetary policy review, FM bats for rate cut to boost investments & growth

To boost investments and growth, Finance Minister Arun Jaitley would like the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) to reduce the policy rates at its upcoming bi-monthly policy review meeting on 6-7 May.

By: | Published: June 5, 2017 12:39 PM
To boost investments and growth, Finance Minister Arun Jaitley would like the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to reduce the policy rates at its upcoming bi-monthly policy review meeting on 6-7 May. (Image: PTI)

To boost investments and growth, Finance Minister Arun Jaitley would like the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to reduce the policy rates at its upcoming bi-monthly policy review meeting on 6-7 May. The minister said in an interview to CNBC-TV18 that based on available indicators such as low inflation, stable oil prices, and lagging growth and investments, the MPC should look to cut policy rates. Earlier, Chief Economic Advisor, Arvind Subramanian, had said that there is enough room and scope for a rate cut.

Finance Minister said that inflation has stayed under control for a long time and is expected to remain under control in the near future as well on account of a possibility of a good monsoon this year. He said, further the equilibrium between crude prices and shale gas prices will ensure that oil prices do not go through the roof and will remain in a range that is affordable by India.

Jaitley said that given the current set of indicators, mentioned above, any Finance Minister would want the RBI to cut rates and so would the private sector.

Jaitley said that the MPC is just in its first year and so it would be too early to comment on the fact that whether the MPC mechanism is a success or not. He also said that even though as a Finance Minister he would like to see rates slashed but since the task of deciding policy rates has been entrusted to an MPC, he will wait for its decision.

Jaitley said that growth is not just defined by policy rates but is dependent on multiple factors. He said growth has dipped as there was over capacity during the boom period during which the banks lent indiscriminately, the global situation was weak as demand went down, and Non-Performing Assets (NPA) reduced the ability of the banks to support growth. The Minister said that the government has tried to reign in these factors through a series of reforms, the next big targets for reforms are the banks and private sector investment.

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