Finance Minister Arun Jaitley hailed the decision of RBI Governor Raghuram Rajan to cut the interest rate, saying it is positive for the Indian economy and will certainly help in reviving the investment cycle the government is trying to restore.
“The RBI decision to cut the interest rate will lead to more money in the hands of the consumer for greater spending.
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“It is positive for the Indian economy and it will certainly help in reviving the investment cycle the government is trying to restore,” said Jaitley who has been nudging the central bank to ease the interest rate to lower the cost of capital.
Earlier in the day, the RBI cut interest rate by 0.25 per cent to 7.75 per cent.
Later in a statement, Jaitley said the rate cut move is consistent with strong and ongoing disinflationary trends identified in the Finance Ministry’s Mid-Year Economy Analysis for 2014-15 presented to Parliament last month.
“This is a significant move in signalling a shift in stance and direction for policy going forward, as the RBI’s statement has noted,” he added.
Also read: Raghuram Rajan’s RBI effects surprise repo rate cut, analysts say real effect ‘not much’, look to future
This move, Jaitley said, will provide a fillip to the economy directly by increasing the private sector’s ability and willingness to spending.
“It should also help indirectly by improving balance sheet of the corporate sector and banks, facilitating an increase in the demand and supply of credit,” he said.
Jaitley further stated that policy actions already taken by the government along with those under consideration, “this move represents one more step towards reviving investments and realising India’s medium-term growth potential”.
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