Plan panel for lowering interest rate

The Planning Commission on Monday made a case for lowering of interest rates for attracting investments and reversing the declining trend of economic growth. “...Lowering interest rates and reduction in fiscal deficit is important for the stabilising and growth of the economy,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said while delivering the 15th JRD Tata Memorial Lecture.

The Reserve Bank is slated to announce its monetary policy review on January 29, amid industry demand for lowering of interest rates to spur growth.

He said investments in infrastructure had to be financed through increase in domestic savings as reducing the fiscal deficit is important for long-term sustainability of our investment strategy. “Investment inflows have significantly declined by about three percentage points since 2007-08, in the aftermath of global economic crisis. We need to reverse this trend to achieve high economic growth and for this, we need fixed investment of 35 per cent by the end of the (current) plan period, from the level of 34 per cent in 2007-08,” he said.

Ahluwalia said investment could get back only by savings or else the current account deficit (CAD) would increase exponentially. He said a CAD of 4.2 per cent was not sustainable for growth.