Logical to expect a rate reduction after good monsoon: Jaitley

Wednesday, Aug 31, 2016,11:40 IST By metrovaartha A A A

New Delhi | With inflation likely to moderate following a good monsoon, Finance Minister Arun Jaitley has said it is “logical” to hope for a rate cut by RBI though the actual decision will have to be taken by the central bank.

Buoyed by the monsoon progress, the minister exuded confidence that India can achieve a 9-10 per cent growth rate with a supportive global economic environment.

“Once the indications are that in coming months these prices are going to come down, in some cases it might come down significantly. And therefore, to hope for a rate cut by any minister or any other person, I think, would be logical,” Jaitley said at a CNBC TV18 awards function Tuesday.

Last week, Commerce and Industry Minister Nirmala Sitharaman had pitched for a 200 bps (2 per cent) rate cut by RBI to help the MSME sector and boost growth and employment generation.

On whether the interest rate in the next monetary policy review due on October 4 will be decided by the Monetary Policy Committee (MPC), the minister said, “That will depend on whether we are able to finalise the nominees on MPC. Our endeavour would be to do that.”

Under the proposed framework, interest rate will be set by a six-member MPC to be headed by RBI Governor.

Referring to the price situation, Jaitley said inflation is likely to come down because prices of food items like pulses and vegetables, which pushed up retail inflation above 6 per cent in July, are expected to ease.

To a question on growth prospects for the current fiscal, the minister said it will be better than 2015-16 as a good monsoon will have a favorable impact on economic activities, given other factors remain constant.

India, Jaitley said, recorded a 7.6 per cent growth rate in the last fiscal despite slower growth in private investment and successive droughts that impacted rural demand.

Jaitley hoped that with private investment picking up and a supportive global environment, India’s growth rate can accelerate to 9-10 per cent.

“We can grow at 9 per cent or 10 per cent only when the global environment is very supportive. You don’t get double-digit growth in an unsupportive global environment.”

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