CALCUTTA, January 17: Union Energy Minister Yogendra Alagh said on Saturday that he was not happy with the decision of the Reserve Bank of India (RBI) to raise its benchmark interest rate and tighten credit supply."I should not make a comment as a minister but as an economist I must say I am not happy with the decision to deflate the economy by the central bank which is in an excess capacity stage," Alagh told a seminar in the eastern city of Calcutta.
The RBI, moving to check a depreciation in the rupee and stabilise the foreign exchange market, raised the benchmark bank rate, the interest rate at which lends to other banks, to 11 per cent from nine per cent on Friday.It was part of a package of measures to squeeze credit in the economy. The rupee, hit by senitiments linked to currency declines in East Asian economies, closed at 39.90/40.00 per dollar, off a low of 40.37, after the RBI announcement.
Alagh departed from the topic of his speech in the seminar on engineering technology.
"Given the kindof volatility in South-East Asia how is this message of increasing interest rates here going to help? I hope it is a temporary phase and I think we should push the economy towards expansion and a growth path," Alagh said. The interest rate hike by the RBI came at a time when economists were expecting a turnaround in industrial growth, which slumped to 5.0 percent in April-October (1997-98) compared with 10 per cent in the same period of the previous year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
