RBI has consistently refused to cut down the interest rate since January 2013 on inflation concerns, despite the clamour for rate cut.
Finance minister Arun Jaitley on Tuesday asserted that the government has not put any pressure on the Reserve Bank of India (RBI) to lower interest rates, after his comments on Monday that the high cost of capital was “one singular factor” that had slowed down the growth in the manufacturing sector in recent times.
(Read editorial: Jaitley vs Rajan)
Denying putting any pressure on RBI governor Raghuram Rajan, Jaitley in a Facebook post titled “Reporting With An Agenda”, said, “The reports indicated that I had spoken on the Reserve Bank, its governor and voiced differences with them. The fact is that there was not a single sentence reference (not even a word) in my entire speech on either the Reserve Bank or its governor.”
On Monday, speaking during the inaugural session of government’s manufacturing campaign Make In India workshop, the finance minister had singled out the high cost of capital as the one factor that has adversely impacted the manufacturing sector, which had seen growth plummet to an over five-year low of 7.6 per cent in October.
“The credit offtake is slow, infrastructure creation becomes slower, and the manufacturers find it difficult to afford costly capital, because it is going to add to each one of their costs. And, therefore, this is one area where each one of us has to be concerned about,” he had said.
However, the finance minister, in the Facebook post, said that he was making suggestions on improving the country’s manufacturing capabilities and reducing the cost of capital was a part of that.
“Since the subject of the workshop was to develop India into a manufacturing hub, I had made several suggestions which would enable India to improve its manufacturing capabilities… One of the many points that I made was that the cost of capital has to be cut down. Any one speaking on the subject of ‘Make in India’ into a manufacturing hub would necessarily suggest this,” the finance minister said.
On November 17, while delivering the key note address at the Citi’s Investor Summit, Jaitley had said that since inflation has moderated, “if RBI, which is a highly professional organisation, in its wisdom decides to bring down the cost of capital, (it) will give a good fillip to the Indian economy.”
The RBI has consistently refused to cut down the interest rate since January 2013 on inflation concerns, despite the clamour for rate cut to bring down the cost of credit.