The Prime Minister Manmohan Singh has hinted that the central bank may further cut key interest rates, taking comfort from falling inflation and increased availability of cash in the country’s economic system.
“With ample liquidity and low inflation, there is scope perhaps for a further moderation in interest rates,” Singh said, adding that availability of credit for “productive needs” should be maintained at reasonable costs.
The Reserve Bank of India has reduced its key repurchase rates by 400 basis points since October last year, in order to help banks lend more and, in turn, promote spending.
“While public sector banks have reduced the prime lending rates in the last three months between 150 and 200 basis points, other Scheduled Commercial Banks are yet to respond in equal measure,” Singh said after a meeting with the country’s top industry leaders.
The Prime Minister has told the industry chiefs that he would request the Governor of the RBI Duvvuri Subbarao to look into the prevailing conditions and seek to take steps on lowering effective interest rates, JSW Steel’s Vice Chairman and Managing Director Sajjan Jindal said after the meeting.
“The Prime Minister mentioned that the interest rate is the most pressing issue right now and needs to be addressed,” he added.
Manmohan Singh has also assured the industry leaders of continuing with spending what was announced in the two stimulus packages to give a boost to the slowing economy, TVS Motor Company’s chairman and managing Director Venu Srinivasan said.
“The prime minister has said that there will be no hiatus in government spending because of elections,” Srinivasan added.
India faces general elections in April and March, and the country’s election code prohibits government from announcing measures that can be considered populist.
The industry representatives asked Singh to oppose protectionist policies by developed nations that prevent free flow of cheap goods and services to such countries from developing countries like India.
“We suggested that India should resist protectionist policies adopted by developed countries to keep their borders closed, “ Jindal said.
Singh will meet leaders of the world’s 20 major economies next week in London at the G-20 to discuss issues related to trade, commerce and economy.
Industry leaders also urged Manmohan Singh to undertake “safeguard measures” to prevent China from dumping products into India, Jindal said.
“Anti dumping measures should be brought about” to protect Indian industry from the impact of cheaper imports from China, Jindal said.
