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Rajan meets FM; discusses economic situation

Rajan meets FM discusses economic situation Amid growing demand for a rate cut by the Reserve Bank, Governor Raghuram Rajan today met Finance Minister Arun Jaitley and discussed a range of “economic issues”.

“We discussed a range of economic issues,” Rajan told reporters after meeting with the Finance Minister.

The meeting assumes significance amid growing calls for a rate cut by the RBI. Jaitley had also pitched for lowering the cost of capital to boost growth.

“Now time has come with moderate inflation to bring down the rates. If you bring down the rates, people will start borrowing from banks to pay for their flats and houses. The EMIs will go down,” Jaitley said in Parliament on December 10.

“I am sure that the authorities who are competent to deal with it are fully seized of this view notwithstanding the balancing exercise between inflation management and growth which they have to do,” he had said.

RBI in last policy review on December 2 had kept policy rates unchanged, saying a shift in stance is ‘premature’ but had hinted that a cut may come early next year if inflation continues to ease and government acts on the fiscal side.

The repo rate continues to be at 8 per cent while the cash reserve ratio is at 4 per cent.

Retail inflation fell to 4.38 per cent in November, the lowest since the government started computing the new series of data in January 2012, as prices of food items went down further.

At the same time, industrial production saw the sharpest contraction in three years of 4.2 per cent in October, putting pressure on RBI to cut rate to boost growth.