Don't fritter away macro gains via giveaways: Urjit Patel

He said steep interest rate subventions, large credit guarantees would impede allocation of funds

With Budget 2017 around the corner, Reserve Bank of India (RBI) Governor Urjit Patel warned the government against squandering macroeconomic gains through giveaways and against high government debt, the latter of which he said was hurting India's ratings. 

"It is easy and quick to fritter away gains regarding macroeconomic stability. But hard and slow to regain them," Patel said at the Vibrant Gujarat summit in Gandhinagar. While some government guarantees and limited subventions could be of help, steep interest rate subventions and large credit guarantees would impede optimal allocation of funds and increase moral hazard, he added. 

Further, Patel said, "In conjunction, the level of our general government debt as a ratio to GDP is cited by some as coming in the way of a credit rating upgrade."

These remarks come days after Prime Minister Narendra Modi announced interest rate subventions on small home loans and doubling the credit guarantee limit for small businesses to Rs 2 crore, reported The Times of India.