Jaitley hopes Reserve Bank will stay on rate easing path

Jaitley says interest rate hardening had hurt real estate; hopes inflation will be reined in going forward, to allow further rate cuts

Union Finance Minister Arun Jaitley on Saturday expressed the hope that the Reserve Bank of India (RBI) would continue to cut key policy rates, as the inflation has been brought under control.

Jaitley said interest rate hardening had impacted the real estate sector adversely and it was a pre-requisite that inflation was kept under control for a sustained period of time. “Fortunately that has happened,” said the minister, while addressing a CREDAI, an organisation of real estate players, event.

After staying at double digit levels for about two years, inflation started coming down from 2014, he said.

The Consumer Price Index (CPI)-based inflation rose 4.41 per cent year-on-year in September higher than upwardly 3.74 per cent inflation in August but stayed within the central bank's comfort zone.

“Therefore, we can also look back with a sense of satisfaction that over the last one year, RBI has also, at least on four occasions, taken positive steps as far as the rates are concerned,” said Jaitley. RBI has reduced repo rate, which is the key policy rate by 125 bps in 2015 as inflation ebbed. The repo rate is at a four-and-half-year low of 6.75 per cent.

“Hopefully, this movement is there to stay and in the current global price structure, we're able to keep inflation under control,” Jaitley said.

The finance minister said the real estate sector is going to be next driver for economic growth. But he told real estate players to become competitive and depend less on doles. “They should not survive just on subsidies (given for pushing housing building  activity) and have to survive in market economy.”

Future growth in the sector would be driven by suburban townships with proper infrastructure. The age of slowdown for real estate should come to an end. It should see resurgence, he said.