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Finance Minister Arun Jaitley raises rate-cut pitch again, says falling food inflation builds case for reduction in policy rates

Ahead of the central bank's monetary policy review in December; moves on GST front, too

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Finance minister Arun Jaitley has made himself amply clear on what his expectations are from Reserve Bank of India governor Raghuram Rajan on key rates.

Jaitley believes that given the current inflation scenario the RBI has the room for relaxation in the key rates to provide an impetus to the economy.

The minister also expressed hope that the long-pending Insurance Amendment Bill will be passed in the upcoming session of Parliament and pending issues on the Goods & Services Tax (GST) front will also be ironed out soon.

During an interaction with investors at a summit on Monday, he said that the context of inflation and particularly the food inflation cooling off, RBI's relaxation would come in handy.

According to sources, Jaitley said, "Inflation, especially food inflation, has moderated in last few months and global fuel prices have also come down. Therefore, if RBI which is highly professional organisation in its wisdom decides to bring down the cost of capital will give a good fillip to the Indian economy."

Over the last few years, the policy rates have been an issue on which both North Block and the Mint Street have got into a warring stance. The difference of opinion was pitched to an extreme tangent in October 2012, when an exasperated P Chidambaram simply lost hope from then governor D Subbarao and said the government would walk alone to face the challenges of growth. At present, however, there is no such ideological difference but the government is indeed looking forward to a rate cut as it believes it is an opportune time.

The RBI, meanwhile, believes the contrary.

According to officials, RBI is exercising caution as it believes that there might be an upturn in inflation during the end of the third quarter or the beginning of the fourth quarter.

On the policy front, meanwhile, the government is going ahead full steam. As regard GST, Jaitley is in touch with the various state governments and most of the contentious issues have already been resolved. There are two areas including liquor and petroleum products where the states want to have taxation authority. Two states want entry tax and octroi to be kept out of the purview of GST. The finance minster said all these issues will be sorted out soon and he will also apprise the Empowered Committee of State Finance Ministers' about the draft Constitution Amendment Bill on GST before introducing the same in Parliament.

Infra sector tie-up with US
In a follow-up to the joint statement of Prime Minister Narendra Modi and US President Barack Obama, in September, a memorandum of understanding (MoU) was signed on Monday between Ministry of Finance, and US Department of Commerce on establishing infrastructure collaboration platform.

This MoU establishes a US-India Infrastructure Collaboration Platform, under which both the governments intend to coordinate and cooperate with the goal of facilitating US industry participation in Indian infrastructure projects to improve the bilateral commercial relationship and benefit both the participants' economies.

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