A day prior to the Reserve Bank of India's (RBI) third-quarter monetary policy review scheduled for tomorrow, Union Commerce and Industry Minister Anand Sharma said any rise in interest rates would hinder industrial growth.
"Inflation is definitely a cause of concern. But it cannot be curbed by increasing interest rates. Instead, for the development of industry and growth of the economy, there is a need to provide easy credit to the industrial sector," Sharma told reporters on the sidelines of an event organised by the CII here today.
The RBI is widely expected to raise key short-term rates tomorrow to rein-in inflation.
There is a need to allow capital inflows and easy credit flow for the growth of economy, he said.
"For a clear growth of the economy, there is a need for capacity addition. Foreign capital inflows and making credit easily available for the industrial sector by public sector banks will ensure robust industrial production," Sharma said.
Cutting exports would only lead to cutting economic growth and not inflation. "This will result in job loss," he said.
On the government's policy on foreign direct investment (FDI) in retail, Sharma said, "We are actively considering allowing FDI in the retail sector. We have received inputs from stakeholders and investors and (now) have to formally finalise the issue."
Currently, India allows up to 51 per cent foreign investment in single-brand retail but has so far resisted any move to open-up multi-brand retail.
"We want FDI for creating a complete value-chain with investments being made majorly in developing back-end infrastructure. We expect 50 per cent of the investments to be made in the rural areas for development of robust back-end infrastructure that would ensure job creation," he said.
The government is likely to sign economic partnership agreements with Japan and Malaysia next month, he said.
"We look forward to concluding free trade agreement with the European Union and next month we will be signing economic partnership agreements with Japan and Malaysia," Sharma added.
