FM wants interest rates lot lower; no difference with RBI

Says there is nothing wrong in two institutions - government and RBI - having conflicting opinions

Despite two interest rate cuts this year by the Reserve Bank of India (RBI), Finance Minister Arun Jaitley on Monday said he wants interest rate to be "a lot lower".

Jaitley also asserted there were no differences between the government and RBI.

"My position very clearly is not very different with that of RBI. We need to manage inflation along with growth. We cannot afford to have inflation go up radically so the RBI is a little conservative and they try and manage the inflation, so they are a little careful in lowering the interest rates," he said.

"I want the interest rates to be lower a lot more, but they (RBI) balance inflation with growth," he said.

RBI Governor Raghuram Rajan had cut repo rate by 0.25 per cent each in January and March outside scheduled monetary policy reviews. He, however, kept the rates unchanged in the first bi-monthly monetary policy of the current financial year earlier this month.

Jaitley said "there is nothing wrong" in two institutions - government and RBI - having conflicting opinions.

"There are evolving opinions world over on the role of central bank. The Reserve Bank in India has done a great job. Now the different opinions are there in some areas (on) how monetary policy is decided. Is there a committee? What is the level of consultation with the government?," he said.

The finance minister said he was not "unhappy" with the Reserve Bank and pointed to Prime Minister Narendra Modi praising Rajan at the central bank's 80 anniversary function in Mumbai earlier this month.

Referring to public debt management, Jaitley said except for Russia, China and a few countries, it has been entirely shifted to the government from the central bank.

Even the Raghuram Rajan Committee had earlier said that there was a conflict of interest in RBI managing the government, he noted.

"Now this is not an issue of any personal disagreement. These are issues on which institutional structures have to evolve. Should they be surgically cut out? Or should evolve over a period of time?

"Now I have been having a lot of meetings and discussions with the RBI Governor. Officers are having it... Wait for few days when the Finance Bill comes up for discussion you will find that there are not too many grey areas in this," the Finance Minister said.