Govt borrowing to put pressure on interest rates: Rangarajan

The huge government borrowing is likely to put pressure on interest rates in the remaining part of this fiscal, Member of Parliament and former Reserve Bank Governor C Rangarajan said today.

This year the government borrowing will be four times than projected in the 2008-09 Budget. This is going to be a large borrowing. It will put some pressure on interest rates, Rangarajan told reporters at the Skoch summit being held here.     

However, a low appetite for credit from the private sector this year would facilitate the public borrowing in the first-half of the year, he said.     

This would help to minimise the impact of borrowing on the interest rates, Rangarajan said.     

It (the government borrowing) is going to be a matter for the Reserve Bank to manage. To some extent, the private sector borrowing this year may not be that large. This would also facilitate the large government borrowing, Rangarajan said. 

The Indian economy is expected to recover from the impact of global recession in the second half of 2009 but a full recovery would happen only in 2010, Rangarajan said.     

The (Indian )economy is likely to pick up in the second-half of this year. But the real and substantial recovery will happen only in 2010, he said.     

Asked about the chances of the Chinese Yuan replacing the US dollar as reserve currency, Rangarajan said he did not expect that to happen immediately.  

I do not think that it will happen immediately, he said.