FM Calls for Low­er­ing of Rates to Make Econ­omy Com­pet­i­tive

Rules out re­view of ex­cise duty on jewellery & calls for eth­i­cal ap­proach to busi­ness

The Economic Times - - Economy - Our Bureau

New Delhi: A day be­fore the Re­serve Bank of In­dia re­views its mone­tary pol­icy, finance min­is­ter Arun Jait­ley called for low­er­ing of in­ter­est rates to make the econ­omy com­pet­i­tive while tak­ing a dig at those crit­i­cis­ing the de­ci­sion to cut in­ter­est rate on small sav­ings schemes. “The move­ment in the last one year as far as the in­ter­est rates have been con­cerned has been down­wards,” Jait­ley said on Mon­day, ad­dress­ing Con­fed­er­a­tion of In­dian In­dus­try’s an­nual ses­sion.

The min­is­ter ruled out any re­view of ex­cise duty in­tro­duced on jewellery, called for eth­i­cal ap­proach to busi­ness in view of loan de­faults and warned that tax ad­ven­tur­ism will prove costly. “The gov­ern­ment has stuck to the fis­cal deficit com­mit­ments and in­fla­tion has been un­der con­trol and, there­fore, I do hope this move­ment will con­tinue in or­der to make our own econ­omy more com­pet­i­tive with more com­pet­i­tive in­ter­est rates,” he said.

Con­sumer in­fla­tion eased to 5.18% in Fe­bru­ary from 5.69% in Jan­uary.

RBI is widely ex­pected to cut the repo rate, the bench­mark pol­icy rate, by at least 25 ba­sis points or 0.25 per­cent­age points on April 5 along with an­nounc­ing mea­sures to en­sure the rate cuts are passed on.

The repo rate is the rate at which banks bor­row from RBI and is ef­fec­tively the floor on in­ter­est rates.

In the run-up to the Bud­get, RBI gover­nor Raghu­ram Ra­jan had cau­tioned against de­vi­at­ing from the path of fis­cal con­sol­i­da­tion. Last week the gov­ern­ment said it had met the fis­cal deficit tar­get of 3.9% of GDP for 2015-16. Last month, the gov­ern­ment slashed the small sav­ings rate by as much as 130 ba­sis points for some schemes, strength­en­ing the en­vi­ron­ment for rate cut while invit­ing po­lit­i­cal crit­i­cism for the move.

On Mon­day, Jait­ley called for a re­spon­si­ble po­lit­i­cal de­bate on such is­sues. The pre­vi­ous UPA gov­ern­ment had de­cided to bench­mark the in­ter­est rates on small sav­ings to the yield on gov­ern­ment se­cu­ri­ties to re­duce the dis­tor­tion they cause in in­ter­est rate struc­ture.

While an­nounc­ing this an­nual re­set, the NDA gov­ern­ment said it will bench­mark rates more fre­quently ev­ery quar­ter. The sharp de­cline in mar­ket rates re­sulted in a large cut in small sav­ings rate.

“Re­spon­si­ble po­lit­i­cal groups (are) tak­ing a po­si­tion which sup­ports high in­ter­est rates, some­thing which is ab­so­lutely ca­pa­ble of mak­ing us a slug­gish econ­omy,” Jait­ley said. Re­tirees should be look­ing at PFs, he added.

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