Arun Jaitley nudges RBI to cut rate for boosting growth

Days after the Reserve Bank of India kept on hold the policy interest rates, Finance Minister Arun Jaitley on Sunday nudged the Central bank to cut policy interest rates and said he hoped the RBI would take into account certain factors before deciding on future course of action.

“I, on the same evening (policy day) already issued a clear statement and I think that’s very clear. This an issue that the RBI decides and I am sure they factor in various circumstances,”  Jaitley told reporters after addressing the Central Board of the RBI.

While the finance minister had backed the RBI policy move in June saying the RBI had followed a calibrated approach aimed in the direction of balancing between growth and inflation. But last month after the consumer price inflation came down significantly, Jaitley said had expressed the hope that RBI would cut policy interest rate.

“Interest rates have gone up. Hopefully, if inflation moderates, they will come down," the minister told Parliament recently. But contrary to his expectation the rates remained unchanged in the second bi-monthly policy review on August 5. After that, finance ministry expressed its displeasure saying inflation was moderating and going forward "the RBI should examine the liquidity situation, inflation and growth in setting policy rates".

On June credit policy, he had said the government was “concerned with restarting” the investment cycle and moving towards higher growth and job creation. RBI Governor Raghuram Rajan, who was present at the press meet, said “as of now, we think the policy (to contain retail inflation) is on target. RBI's policy measures are contingent on the data coming in.”

The policy regime, Jaitley said in his address to RBI board, was being geared to attain higher growth, lower inflation and sustainable external balance in the backdrop of sub-five per cent growth in last two fiscals.

RBI is targeting a retail inflation (CPI) of 8 per cent in January 2015 and 6 per cent in the following January.

Later, RBI in a statement said that while addressing the board, Jaitley stressed that the policy regime was being geared to attain higher growth, lower inflation and sustainable external balance in the backdrop of sub-five per cent growth in last two fiscals.