Interest rates may not rise sharply: Rangarajan

The government's high borrowings may not push up interest rates sharply towards the end of this year and are likely to hover around the current levels, Prime Minister's Economic Advisory Council chairman C Rangarajan said.

"...There may not be any sharp increase of the interest rates. I think the interest rate will more or less remain at this level," Rangarajan told news channel CNBC TV18.

The private demand is still not picking up and the funds under market stabilisation scheme are also maturing "that would also provide additional liquidity into the system," he said.

The government has proposed to borrow Rs 4 lakh crore from the market during the current fiscal.

He further said that the Indian economy is likely to grow between 6 per cent and 6.5 per cent in the current fiscal even after taking into consideration the impact of international financial crisis as well as drought.  

"Taking into account the impact of international financial crisis as well as drought I still think the Indian economy will grow between 6 per cent and 6.5 per cent," he said.     

He expects the Indian economy to do much better in the second half of the current fiscal compared to last fiscal.    

The country managed a reasonable economic growth of 6.1 per cent in the first quarter of the current fiscal despite the global financial crisis.