'Hard decisions needed to boost sentiment'

The government needs to take “hard decisions” to create an environment for industry to grow, Prime Minister’s Economic Advisory Council Chairman C Rangarajan said here on Thursday.

“I think hard decisions are required in terms of creating proper environment for industry to grow,” he told reporters while replying to questions. Asked if he saw a case for a rate cut by the RBI in its credit policy to be unveiled on April 17, Rangarajan said, “It’s not just a monetary policy. I don’t think adjustment on interest (rate) alone will bring about the desired results. All that we really need to do is to push up the sentiment in the economy.”

He said, this fiscal, if targets relating to some of the public sector infrastructure like coal, power, roads and Railways are fulfilled, this itself would act as a stimulant for private investment. He also said that the RBI needs to take the growth factor into account.

“But at the same time, we also need to wait for what happens to inflation. One more data point will come in the next few days. That will indicate if the trend that was noticed earlier of decline in headline inflation continues,” he said.

Rangarajan added, “What we really need to watch out for is that what happens not only to headline inflation but also to the manufacturing inflation. The point is really that the trend noted in the manufacturing inflation will give us the idea as to what the RBI should do (vis-a-vis to cut the rate or not).”