Interest rates may not rise sharply: Rangarajan

"...there may not be any sharp increase of the interest rates. I think the interest rate will more or less remain at this level," Rangarajan said.

The private demand is still not picking up and the funds under market stabilisation scheme are also maturing "that would also provide additional liquidity into the system," he said.

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

He further said that the Indian economy is likely to grow between 6 and 6.5 per cent in the current fiscal even after taking into consideration the impact of international financial crisis as well as drought.

"Taking into account the impact of international financial crisis as well as drought I still think the Indian economy will grow between 6 and 6.5 per cent," he said.

He expects the Indian economy to do much better in the second half of the current fiscal compared to last fiscal.

The country managed a reasonable economic growth of 6.1 per cent in the first quarter of the current fiscal despite the global financial crisis.