Nirmala Sitharaman Calls for ‘Affordable’ Interest Rates Amid Inflation Concerns
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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has maintained its key interest rates unchanged since February 2023, citing persistent inflation pressures. In this context, Union Finance Minister Nirmala Sitharaman has raised concerns about the affordability of borrowing costs, emphasizing the need for lower interest rates to support industrial growth and capacity expansion.
Speaking at an event organized by the State Bank of India, Sitharaman stressed that high borrowing costs are hindering the ability of industries to grow and scale. “At a time when we want industries to ramp up and build capacities, our bank interest rates will have to be far more affordable,” she remarked. This is not the first time that Union Ministers have highlighted the issue of high lending rates, with Commerce and Industry Minister Piyush Goyal also voicing concerns recently.
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Interest Rate Outlook
Since February 2023, the RBI’s MPC has held the repo rate at 6.50%, a level set to address inflationary pressures. The latest data shows retail inflation in October 2024 surged to 6.2%, marking the highest level in 14 months. Food inflation, in particular, has remained a significant driver of price hikes. However, RBI Governor Shaktikanta Das has suggested that cutting rates at this juncture could be premature, as inflation remains above the RBI’s target range of 2-6%.
Comparison of Key Economic Indicators
| Indicator | October 2024 | February 2023 | Change |
| Retail Inflation | 6.2% | 6.4% | -0.2% |
| Repo Rate | 6.50% | 6.50% | No change |
| Food Inflation | High (ongoing) | High (ongoing) | No change |
Piyush Goyal’s Critique
Piyush Goyal has recently critiqued the link between food inflation and interest rate decisions. He argued that food inflation is a result of supply-demand imbalances, not monetary factors. Although Goyal’s comments were framed as his personal views, they have sparked debate about whether the RBI should adjust its policies to exclude food inflation from its broader inflation targets.
As discussions continue about the future of India’s monetary policy, the upcoming MPC meeting, scheduled for December 2024, will likely address the ongoing challenges of balancing inflation control with economic growth. While experts predict that the repo rate will stay unchanged, the possibility of lower interest rates remains a key point of contention in the ongoing debate.
Conclusion
With inflation still a pressing issue, the call for more affordable interest rates reflects the growing concern among ministers that high borrowing costs may hinder India’s economic recovery. As inflation remains above target, the RBI’s policy stance will continue to be closely scrutinized in the coming months.
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