‘Strong case for incentivising growth’

Ahead of the Reserve Bank of India’s monetary policy meet, Economic Affairs Secretary Arvind Mayaram, on Wednesday, said signs of moderation in inflation had strengthened the case for a cut in interest rates to boost economic growth.

“I don’t think there is a case for rate hike at all at this point of time. If the RBI is comfortable at the manner at which the inflation is coming out, they may consider it (rate cut)...

“And, I also believe that there is now a very strong case for incentivising growth...because we now need to move out of this trough, specially considering the fact that employment is also suffering, investments have been sluggish...,” Dr. Mayaram told a television channel here.

The Secretary is here to attend the annual World Economic Forum (WEF) meeting at this Alpine ski resort town.

Wholesale inflation declined to a five-month low of 6.16 per cent in December, while the Consumer Price Index (CPI) based inflation declined to three month low of 9.87 per cent.

The data raised hopes that the RBI will lower interest rates in its third quarter monetary policy review on January 28.

To a query on government’s share sale in Hindustan Zinc Limited (HZL) and Balco, Dr. Mayaram said stake sales must happen before March 31, the last day of the current financial year.

The Secretary also said the government was “not looking” at selling its stake in either L&T or ITC held through SUUTI at this point of time. The statement comes within days of the government appointing merchant bankers to sell its stake Axis Bank, the third entity in SUUTI holdings.

Prepared to face Fed tapering: Chidambaram

Assuring global investors that India was prepared to face the impact of U.S. Fed tapering, Finance Minister P. Chidambaram, on Wednesday, said the country was poised to clock 5 per cent growth in the current fiscal and over 6 per cent a year after.

The Indian economy, he said while addressing the World Economic Forum (WEF) meeting in Davos, had “stabilised and it is poised to return to high growth path and step by step we will go back to 8 per cent growth rate.’’ India’s growth rate slipped to a decade-low of 5 per cent in 2012-13.

Talking about the impact of calibrated tapering of bond purchases by the U.S. Federal Reserve, Mr. Chidambaram said: “We have done a lot of preparatory work. There will be some consequences on emerging economies but I think we are better prepared now to face the taper.’’

The Federal Reserve has announced trimming of its $85 billion monthly stimulus after U.S. economic indicators improved.

Commenting on the report of the RBI panel on monetary policy, headed by Deputy Governor Urjit R Patel, Mr. Chidambaram said, it was good that the committee suggested an inflation target of 4 per cent.

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