Jaitley at it again, says economy will get boost if RBI cuts interest rates

New Delhi: Pitching for a rate cut by RBI,Finance Minister Arun Jaitley today said lower cost of capitalwill give a “good fillip” to the economy.

“I am quite clear in my mind that the cost of capital hasto come down. Inflation has moderated, global fuel price haseased. Therefore, if RBI, which is a highly professionalorganisation, in its wisdom decides to bring down the cost ofcapital (it) will give a good fillip to the Indian economy,“he said.

Delivering the key mote address at the Citi’s InvestorSummit, Jaitley hoped that as a professional organisation theReserve Bank will take “the best decision”.

RBI Deputy Governor S S Mundra, who was present, latersaid the central bank revises rate, but not on “populardemand. It changes when there is a clear conviction”. At a different function, Mundra told reporters that RBIwill take into account various economic parameters whiledeciding on interest rate at its next policy.

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The RBI, which has kept the key borrowing rate at 8 percent since January to check inflation, is scheduled to comeout with its next monetary policy on December 2.

Meanwhile, September retail inflation has dropped to arecord low of 5.52 per cent in October, while the wholesaleinflation eased to five-year low of 1.77 per cent.

Indian economy, which slipped to below 5 per cent growthin two consecutive fiscals, is expected to improve to 5.4 to 5.9 per cent in 2014-15.

Giving details of various economic reform measures inthe pipeline, Jaitley specifically talked about the Goods andService Tax (GST) and Insurance Amendment Bill. The Minister said that he was expecting that InsuranceAmendment Bill will be passed in the forthcoming WinterSession of Parliament. He said he was in touch with the Parliament SelectCommittee, currently vetting the insurance bill, and would topersuade it to give the report at the earliest.

As regards GST, the Finance Minister said that he is indiscussions with the various state governments and most of the contentious issues have already been resolved. Jaitley said he will also apprise the EmpoweredCommittee of State Finance Ministers of the draft ConstitutionAmendment Bill on GST before introducing the same inParliament.

The GST rollout has missed several deadlines because oflack of consensus among states over certain crucial issues onthe new tax regime.

Noting that various sectors have been opened for foreigndirect investment in the infrastructure sector by thepresent government, Jaitley stressed the need to take quickdecisions. “Merely opening yourself out for international investor isnot enough, merely saying we will have a red carpet is notenough. The system within must be decisive, you can’t haveinvestment coming in and stuck in the want of some clearance or some tax policy,” he said.

Jaitley said that the targets fixed for disinvestment inthe current financial year are quite ambitious one, but he washopeful of reaching near the same. “We have very ambitious disinvestment target this year. Ihope we will able to reach close to that,” Jaitley said.He added that road shows in this regard are being heldin many parts of the world.

The government has set an ambitious target of Rs 43,425crore to be mopped up from PSU disinvestment in the current fiscal.

The Minister said that he is in discussions with themembers of opposition parties to make necessary proceduralchanges in Land Acquisition Act in order to avoid delay in theimplementation of the infrastructure projects.

Department of Economic Affairs Additional SecretaryDinesh Sharma and Citi Bank CEO Parmit Zhaveri were alsopresent on the occasion.

PTI