Planning Commission Deputy Chairman Montek Singh Ahluwalia today said the RBI and the government need to step up their efforts to revive growth and made a case for lowering the long-term lending rates to boost the economy.
"I personally feel that we need to do a lot to revive growth, we are doing some...there is more realisation today than there was three months ago (about this)," Ahluwalia said in an interview to CNBC-TV18.
According to Ahluwalia, easing of long-term lending rate would help in revival of economy. However, tinkering with short-term lending rate would not help in reducing long-term rates.
"I do not believe by the way that the critical constraint on revival of the economy is to tinker with short-term rates.
"I know that nothing would be better for growth than for the long-term interest rate to come down but the idea that the RBI Governor can lower the long-term rates by lowering the short-term rates, no matter what is happening in the macro economy. It is just plain rock," he said.
Last week, Reserve Bank of India reduced marginal standing facility rate (for banks) by 75 basis points to 9.5 per cent and unexpectedly increased repo rate by 25 basis points to 7.5 per cent.
About any move to cut Plan expenditure to contain fiscal deficit in 2013-14, he said, "We are not planning cuts in Plan expenses."
The government in 2012-13 had cut about Rs 92,000 crore from the budgeted Plan expenditure of Rs 5.21 lakh crore to contain the fiscal deficit.
"I would not call these cuts in Plan expenditure. I would call them procedural limits which will prevent Plan expenditure from going up," he said.
Elaborating further, Ahluwalia said: "Last year there was no cut below entitlement, people have not spent the money and they know perfectly well the rules that you cannot spend more than one third of the total in the last quarter."
"So, if you have not spent very much in the first quarter, it automatically limits the total amount you can spend and whether the same thing will happen this year. We will have to see."