It is not just a rate cut, it's a turn of the cycle: Jayant Sinha

Raghuram Rajan kicked off Makar Sankaranti in a flying manner by cutting the interest rate by 25 bps to 7.75 percent. The markets cheered the move and at close the Sensex and Nifty gained over 2.6 percent each with the Bank Nifty closing 3.4 percent higher. [caption id=“attachment_1794559” align=“alignleft” width=“380”] Image courtesy CNN-IBN[/caption] RBI’s move was not just cheered by the markets but also the government. In an interview to CNBC-TV18, Minister of State for Finance, Jayant Sinha said, the rate cut ahead of the due date signals turn of economic cycle and felt that the credit for rate cut should go to the political leadership, the prime minister and finance minister. “I think it is all about the power of leadership and in fact as you know, we have been sent here to do the people’s business and the people’s business is to get the economy moving, to transform the economy and to give better life for all of our people and we have been living in that regard. What we have done in sector after sector whether it is in coal, whether it is in mining, whether it is with goods and services tax (GST), whether it is with the planning commission, whether it is what we are doing in the banking reform,” he said. Sinha said he is hopeful of achieving the fiscal deficit target of 4.1 percent of the GDP, but feels the quality is more important. “Numbers are always achievable and we have seen in the past how those numbers were achieved, it is not just a question of achieving the numbers, the quality of the numbers, the integrity of the accounting that stands behind them, those are equally if not more important because you can rip through the numbers very quickly and establish what is happening with the economy and the fiscal policies that we are pursuing. So it is very important for us to be able to achieve that roadmap that you have just laid out in the highest quality way possible, that is what we are working towards.” the minister said. “It is not just a rate cut. It is the turn of the cycle and that is what is important here. What we have demonstrated now is that the economic momentum that is picking up, the investments that are coming in,” he said. Talking about investment and growth, Sinha said, “Infrastructure has to be there to support manufacturing and to support the natural growth of the economy. So we are taking a number of very important measures starting with power where we are really looking to build up the infrastructure and to be able to establish the platform for manufacturing growth. “We effectively have to find new sources for that equity capital to come in and get new projects started so that is second very important aspect that we are working on. “You are going to see an immediate sort of movement in terms of the economy and the stimulus for the economy is in the stalled projects. There you know that we have put a very significant effort through the Prime Ministers office to monitor those Rs 18 lakh core stalled projects. As well as taking appropriate policy action whether it is through the coal ordinance or whether it is the land acquisition ordinance to actually get those projects moving as well.” When asked if banks were nudged to pass on the rate cut, the minister said, “The Ministry of Finance North Block does not nudge anyone. We have lots of independent institutions which are very capable, very competent to make the right decisions. Our job is to put in place the enabling environment, to be facilitators.” “We are shareholders and we have been very clear in saying that banks have to make commercial decisions on the basis of their own commercial logic. We have in fact put it out in writing that they the operating autonomy and that they should exercise the autonomy when it comes to making those decisions. That is how it should be, that is how a market economy works. I am very hopeful that they will take into account all of these commercial factors and then make the right decision.”