Govt to continue pitching for RBI rate cuts: FM

Union Finance Minister P. Chidambaram called on the Prime Minister of Japan, Mr. Shinzo Abe in Japan.

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SME Times News Bureau | 03 Apr, 2013
The government will continue to argue for easing of monetary stance by Reserve Bank despite 'sticky' consumer price inflation and high Current Account Deficit, Finance Minister P Chidambaram said Tuesday in Tokyo.

"The RBI has to weigh the fact that headline inflation has come down yet consumer price inflation is sticky, it has to keep Current Account Deficit (CAD) in mind before it lowers interest rate. But government is always pro growth and the government will always argue for lower interest rates", Chidambaram is quoted by a news agency report as saying in a television interview to CNBC-TV18

RBI is scheduled to announce the monetary policy for the current financial year on May 3 during which it will take a call on interest rates keeping in view the inflation and other macro-economic parameters like growth rate, industrial production etc.

In its last policy review in last month, the central bank had cut its short-term lending and borrowing rates by just 25 basis points and left the reserve ratios that also control money available for auto, home or commercial loans unchanged.

The corporate sector was none-too-enthused by the RBI move. In fact, for a long time the business community and a section of the government have been increasing pressure on the RBI for lowering interest rates.

In contrast, the RBI has been maintaining tight monetary policy for the last couple of years due to inflationary pressure even though this has resulted in slowing down the economic growth. Time and again, Governor Duvvuri Subbarao has pitched for independence in monetary policy formulation.