Planning Commission Deputy Chairman Montek Singh Ahluwalia today said RBI reducing lending rates along with government efforts to bring down fiscal deficit should boost economic growth this year. "I think the lowering of the interest rate by the RBI combined with Finance Minister Pranab Mukherjee's endeavours to bring the fiscal deficit down, should propel the economy upwards this year," he told reporters on the sidelines of a government function here. Asked whether it was possible to achieve 7.3% growth rate, Ahluwalia said he expected the economy to do better than the previous year. "The lowering of repo rate indicates RBI is satisfied that inflationary pressure is no longer a principal thing to worry about," he added.
Ahluwalia said by lowering the repo rate, "the Governor is giving a signal that the economy is now ready to give a stimulus generally without any danger to the inflationary trend." "I read the RBI lowering repo rate as a balanced judgement that yes inflation is matter of concern, but the time has come to change signals. You cannot wait until it comes down to a very low level "Policies should be adjusted as things move and that's what I think they (RBI) have done," he added. For the first time in three years, RBI today slashed its short term lending rate by 0.50% to 8%.
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