Borrowing may crowd out capital: Rangarajan

The government has proposed to borrow Rs 4 lakh crore during the current fiscal.

Rangarajan, who was delivering a lecture on “International financial crisis and its impact on India’ to Members of Parliament here yesterday, also said that interest rates would go up by the end of the year.

Hardening interest rates
“Interest rates will harden by the end of the year,” he said.

Rangarajan, now a member of the Rajya Sabha, said “as long as the private demand is not picking up, the government will be able to borrow at the same rate.”

He said the economy was likely to show signs of definite improvement in the second half of current fiscal which might lead to a pick-up in demand for credit by the industry.