Rangarajan: Rates to remain steady despite borrowings

The government’s high borrowings might not push up interest rates sharply towards the end of this year and were likely to hover around the current levels, Prime Minister’s Economic Advisory Council Chairman C Rangarajan said. “...There may not be any sharp increase of interest rates. I think rates will more or less remain at this level,” he said.

Private sector demand was still not picking up and funds under the market stabilisation scheme were also maturing, “which would also provide additional liquidity into the system,” he said. The government has proposed to borrow Rs 4 lakh crore from the market during the current financial year.

 

He further said that the Indian economy was likely to grow between 6 per cent and 6.5 per cent in the current financial year even after taking into consideration the impact of international financial crisis as well as drought.

Rangarajan expects the Indian economy to do much better in the second half of the current financial year. The country managed a reasonable economic growth of 6.1 per cent in the first quarter of the current financial year despite the global financial crisis.