Surprise rate cut show RBI's faith in govt's efforts: Jayant Sinha

Arvind Subramanian says outlook for India is looking good and rating agencies should look at the same

Soon after the Reserve Bank of India surprised everyone by an early morning cut in the repo rate by 25 basis points – the finance ministry hailed it as a sign of the Reserve Bank of India’s confidence in the budget.

An interest rate cut on Wednesday by the Reserve Bank of India represents a vote of confidence in the government's fiscal consolidation efforts and will provide a near-term boost to the economy, Minister of State for Finance Jayant Sinha said.

“We are aiming for a non-inflationary sustainable growth path,” he added.

Also speaking at the event, Chief Economic Advisor (CEA) Arvind Subramanian said that it is a sign that the economy is looking up.

“If you take all that has happened in the past couple of days, the railway budget, the union budget, the economic survey, the RBI’s decision to cut rates, is all suggesting that the Indian economy is on its way to maintaining a healthy momentum,” said the CEA.

Subramanian also stated that the outlook for India is looking good and  the rating agencies should look at the same. He also made a point that the Indian economy is not in danger of overheating yet.

“Eaxct timing and magnitutde of future cuts would depend on data. It shows that RBI and government are on the same page,” said Subramanian.

The Revenue secretary also touted the repo cut as a welcome step for the business will also help individuals who take loans from banks and financial institutions.