Commerce and Industry Minister Piyush Goyal on Monday exuded confidence that the Reserve Bank will cut interest rates as inflation is under control. The RBI has been maintaining the benchmark interest rate at an elevated level of 6.5 per cent since February 2023.
Goyal said that the economic fundamentals of the country are strong and inflation is under check.
He said that the average inflation of 10 years in India is about 5 to 5.5 per cent.
It was the best-performing decade and because of that, the interest rate came down “dramatically” and the central bank was strengthened and had the ability to bring down the interest rate.
“Of-course in the last year and a half, post Ukraine-crisis, interest rates have again gone up by 250 basis points. But now that inflation is pretty much in control, I suspect we will soon see the reversal of the rate hikes starting in India, whether it happens in the next or the second monetary policy from now. I think it’s only a matter of time,” Goyal said.
In case the Reserve Bank goes for a reduction in the key short-term lending rate (repo), the cost of borrowings both for corporate as well as individuals, will go down, and hence EMIs.
The RBI on February 8, for the sixth time in a row, left the key policy rate unchanged at 6.5 per cent, which may keep the cost of borrowings for both individuals as well as corporates largely stable, and lowered the retail inflation projection to 4.5 per cent for next fiscal.
The next bi-monthly monetary policy will be announced on April 5.
The consumer price index was 5.1 per cent in January, down from 6.52 per cent in January 2023.
The wholesale price index (WPI)-based inflation eased to a three-month low of 0.27 per cent in January, mainly due to moderation of food prices, including vegetables.
The minister was addressing 35 journalists from 19 Latin American and Caribbean countries here.
He also said that the government’s ambition is to increase the current USD 3.7 trillion economy to be a USD 30-35 trillion economy by 2047.
