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Interest rates to be kept low until recovery signs become more visible: Mukherjee
By Neelima Shankar
Sep 25, 2009
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Indian Finance Minister, Mr. Pranab Mukherjee said that the government will maintain low interest rates until the signs of global recovery become more prominent.

Addressing the annual general meetings of Merchants' Chamber of Commerce (MCC) and the Bengal chamber of Commerce, in Kolkata, the minister said that the ministry would not introduce a tight monetary policy unless the global economy, especially the US and the European economy shows stronger signs of recovery.

Mr Mukherjee indicated the benefits Indian industry enjoyed as a result of lower interest rates. The lower rates gave an easy access to credit to the enterprises, thus helping them recover from this economic crisis.

Dr D. Subbarao, governor of RBI said that the central bank would continue its soft money policy unless the signs of global recovery became more prominent.

Mr. Mukherjee said that according to a recent IMF review, the global recovery was primarily due to Indian and Chinese economies. He further added that he faced a strong pressure, at G-20 Finance Ministers' meet to discontinue providing stimulus. "However, we objected to that and advised our leaders that the G-20 should not consider the issue till the signals of recovery get distinctly strong," he said.

The finance minister also said that high fiscal deficit (6.8%) was unsustainable and they would have to reduce it to 5%. expressing concerns over the export sector, he said "It is unfortunate that Indian export basket is not well diversified and over 60 per cent of exports are made to the US, Europe and Japan. I am afraid there may not be a significant improvement in our exports until there are strong signals of recovery of these economies.

Moreover, the minister was optimistic about the manufacturing sector's performance and said that the there was improvement in the Hydel power supply scenario.

 


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