Rate cut to boost investment: Pranab
New Delhi:The Reserve Bank’s decision to cut lending rate by 0.50 per cent will encourage investments, Finance Minister Pranab Mukherjee said on Tuesday, while assuring the government will also take additional steps to boost growth and control price rise.
“The monetary policy announcements should help in investment revival and contribute to strengthening of business sentiments. In the coming weeks we will take some additional steps to further reinforce focus on growth,” Mr. Mukherjee told reporters in New Delhi.
In its annual monetary policy statement for 2012-13, RBI, after a gap of three years, cut interest rate by 0.50 per cent making credit cheaper.
After clocking over 8 per cent economic growth for two years, India’s GDP expansion is estimated to have declined to 3-year low of 6.9 per cent in 2011-12 on account of high cost of borrowing that slowed investments.
RBI had hiked policy rates 13 times between March 2010 and October 2011 to control persistently high inflation.
It has projected the GDP growth for this fiscal at 7.3 per cent, which is lower than the government estimates of 7.6 per cent for the period.
Mr. Mukherjee said moderation of core inflation rate for four months in a row, coupled with the sharper decline in inflation for manufactured products from 7.6 per cent in December to 4.87 per cent in March, has facilitated the change in monetary policy stance.
“However food and primary inflation has shown signs of hardening. This is a cause for some concern. We intent to continuously monitor the situation and take the required steps to manage the short term supply constraint for those food items which contribute inflation,” he said.
Mr. Mukherjee said the government will do everything possible to maintain price stability.