India’s Finance Minister, Arun Jaitley, is calling for a cut in India’s interest rates in a move which he sees will trigger demand for homes and spur economic growth, according to a report from The Times of India on Saturday.
“Currently, interest rates are a disincentive. Now that inflation seems to be stabilizing somewhat, the time seems to have come to moderate the interest rates,” Jaitley told The Times of India during an exclusive interview.
Last month, India’s Central Bank, the Reserve Bank of India (RBI), held interest rates steady while sending a strong signal that it would stay away from interest rate cuts until it was confident that inflation could be cut to a target of 6% by January 2016.
The RBI has maintained that despite recent moderation in the inflation rate, it still remains a key challenge.
The Finance Minister said that India’s government has two critical areas of concern regarding the economy: low credit offtake and tepid performance in manufacturing.
Jaitley said that domestic banks have been inhibited by loans that are in jeopardy or default on their books, also known as a non-performing asset (NPA) or a non-performing loan (NPL), and that this has created an environment of “defensive banking”.
Jaitley said that India’s Prime Minister (PM), Narendra Modi, would soon be calling a meeting with bank chairmen to urge that they be more liberal with credit to accelerate growth, while at the same time assuring them of full support. The PM’s move to urge a boost in lending comes in wake of domestic credit growth falling to a 13-year low.
“The big worry is the manufacturing sector. That is why the Prime Minister is giving an impetus to the manufacturing sector. We need investments and we need to create an environment of low cost quality manufacturing,” Jaitley said.
Source: The Times of India
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