Finance Minister Nirmala Sitharaman has vouched for bank interest rates to be "far more affordable," saying that this is one requirement if India aspires to become a 'Viksit Bharat' (a developed nation)—not just an aspiration but a reality.
"When you look at India's growth requirements, you can have so many different voices coming out and saying the cost of borrowing is very stressful, and at a time when we want to industry to ramp up and build capacities, bank interest rates will have to be far more affordable," the says at SBI Conclave 2024 in Mumbai.
She says the country needs to have a lot more conversation on this. India's bank interest rates remain high at 6.5%. This places India among countries with "moderately high" interest rates when compared to advanced economies. Last month, the Reserve Bank of India's (RBI) MPC kept the headline rate unchanged at 6.5%, while changing the policy stance to ‘neutral’.
Just last week, Commerce Minister Piyush Goyal also batted for a key interest rate (repo rate) cut, saying it'll lead to growth. "I certainly believe they should cut interest rates, growth is a further impetus. We are the fastest-growing economy in the world. We can do even better."
On the role of food inflation in pushing the overall inflation numbers up, the FM says inflation gets "very volatile" because of the supply-demand constraints.
"The question is that it is the top three perishable goods that are causing stress to the inflation numbers, while for core others it is the low four or three. On the higher end of the three but lower end of four (%) and so on."
She says she does not want to get into the debate of whether perishable should be a part of the inflationary measure index or whether it's a supply-chain problem or a demand-supply problem, which should influence the decision of the monetary policy committee (MPC).
"Yes, we periodically and cyclically suffer from an inadequate supply of perishable commodities. We are making a lot of efforts towards scientific and more rigorous storage facilities for perishable commodities. So till you get to the top of that issue, you will have a problem with tomatoes, onions and potatoes cyclically causing immense stress, when you have the harvest season, you get it all, later if there is rain or drought and the end of the supply season, you always have a shortage. We try to import and make up."
The FM said edible oil is another area where the government is doing "right" by supporting the growers to have more oilseed production. "We have even brought a palm oil mission, so palm can be grown in favourable climatic zones of the northeast."