RBI could have given stronger signal to push growth: Montek

Appreciating the RBI's decision to cut key interest rate by 0.25%, Planning Commission Deputy Chairman Montek Singh Ahluwalia today said it could have given a more robust signal to the industry.

"This (rate cut) is a signal and I have to say that it is in the right direction", he said, while addressing an Assocham conference here.

"We are looking at it with unhappiness. We feel, the signal should have been stronger...Many people would say that the signal should have been more robust than 25 basis points", Ahluwalia said while commenting on RBI's decision to cut short-term (repo) rate by 0.25% to 7.5% to boost growth.     

"I am glad that RBI has signalled continuing reduction of the rate," he said, adding the macro economic situation has started turning around for the better.

According to Ahluwalia, if everything goes well on the economic growth front for the next three months, then one can say that the economy will be back on higher growth trajectory in the long run.

He opined that the $1 trillion investment target in the infrastructure sectors with half of it coming from private sector, for the 12th Five Year Plan (2012-17), is an ambitious number.

As per his assessment, the investment in infrastructure in 12th Plan could be $900 billion with half of it coming from private sector.

He explained that the targeted $1 trillion investment in infrastructure for the current Plan period would mean a debt component of $700 billion debt component and the financial institution would have to think on financing all of that.

On the criticism over public private partnership (PPP) projects, he said user charges is very crucial for these projects but those should be imposed in a transparent manner.

On the other hand, Prime Minister's Economic Advisory Council chairman C Rangarajan today said a 25 basis-point cut in the policy rate by the Reserve Bank of India is appropriate and in the right direction. Going forward, he said the RBI actions will depend on how overall inflation moves.

The former RBI governor said the central bank will take appropriate open market operations to manage the liquidity since Cash Reserve Ratio (CRR) is not the only tool.