Common sense says interest rates should come down: Jaitley

Days before RBI Governor Raghuram Rajan unveils his bi-monthly monetary policy, Finance Minister Arun Jaitley on Monday said according to common sense, the interest rates should come down.

He said inflation is “very much under control” and the country is better prepared than most emerging economies to weather the global economic turbulence.

“Common sense says the rates should come down,” he told The Financial Times.

RBI is scheduled to present its fourth bi-monthly monetary policy of the current financial year on September 29 amid clamour by the government and the industry, for an interest rate cut to bring down cost of capital and boost growth.

Jaitley said if interest rates were lowered, the economy could grow faster than 7-7.5 per cent.

This year, RBI cut interest rates by a total of 0.75 per cent in three tranches but refrained from taking action at the last monetary policy review in August. “If oil is selling at half the normal price, commodity prices are low, and we have stocks and stocks of food grain. Inflation is the least of our worries,” he said.

India imports about 80 per cent of its oil and is a big beneficiary of low global prices.

On the proposed interest rate setting monetary policy committee, Jaitley hinted a compromise had been reached and that the government might not have the deciding vote after all, FT said.

“The government and the bank are on the same page as far as this is concerned,” he said, adding that India’s proposals were in line with many other countries.