Higher interest rates are the single biggest impediment to investments--- believes finance minister Arun Jaitley's predecessor P Chidambaram. In an exclusive interview with CNBC-TV18, the former finance minister added that the RBI is right in being cautious over rate cuts. He also cautioned the government against targeting growth rate of over 8 percent saying it could be inflationary.
Below is the transcript of P Chidambaram's interview
Q Is the RBI governor looking at easing rate cycle?
A I don’t think Raghuram Rajan is on an easing cycle; he wishes to get on to that cycle but is waiting for more data. He is right, we need to see how the monsoon turns out, it is very critical; the monsoon that should break out in end May and early June is very critical. We need to see how the kharif crop turns out. But going forward he is obliged to ease the interest rates; interest rates have to move down because that is the single biggest factor that is inhibiting investment. Q. Will the government achieve its growth traget this fiscal?
A. 7.5 percent is achievable. It could be a few basis points above 7.5 percent, closer to 8 percent; but I can’t see how it can be more than 8 percent. In fact, I would caution them not to attempt anything more than eight because then that becomes a bit inflationary.
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