Chidambaram welcomes rate cut, promises more govt action

London: Finance Minister P Chidambaram has welcomed RBI’s decision to cut interest rates and said more steps will have to be taken by the government to boost growth.

“They (RBI) have taken the call now, they have given the reasons…and I welcome the decision. But interest rates (are) … one issue that India faces. There are many other issues that have to be addressed and I hope we can address them in the days ahead,” he told the Financial Times in an interview.

He was commenting on the decision of the RBI to reduce interest rate by 0.25 percent and release Rs 18,000 crore of additional liquidity in the system by lowering cash reserve ratio (CRR) by a similar margin.

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Noting that there is always a debate between need to promote growth and contain inflation, Chidambaram said “so one has to do a trade-off between inflation and growth, and I have argued - my colleagues in Government have argued - that perhaps a monetary authority should lean a little more in favour of growth”. However, it is up to the central bank to take a call on the extent of monetary easing, he said.

“When they should do that, to what degree they should do that is their call. They have taken the call now, they have given the reasons,” Chidambaram said.

The other key issues, which are needed to be addressed by the government to promote growth, include “environmental clearance, forest clearance, other approvals, bank finance for projects”.

The real problem, he said, is to get the stalled projects off the ground, raise the savings ratio and encourage corporates, those who are sitting on piles of cash, to move ahead with investment projects.

PTI