New Delhi: The credit for rate cut by the Reserve Bank should go to the political leadership of Prime Minister Narendra Modi, Minister of State for Finance Jayant Sinha said today.
“I think it is all about the power of leadership… I think the credit (for rate cut by the RBI) should go to the political leadership, to our honourable Prime Minister and Finance Minister (Arun Jaitley),” Sinha told CNBCTV18.
“We are pursuing prudent fiscal policies saying that we are committed to sound economic management, fiscal roadmap of 4.1 per cent, 3.6 per cent, 3 per cent. That is how we have led and when we lead then obviously all the other institutions follow,” he added.
Sinha, a former McKinsey consultant noted that the rate cut signals turn of economic cycle.
“It is not just a rate cut. It is the turn of the cycle and that is what is important here. What we have demonstrated now is that the economic momentum that is picking up, the investments that are coming in,” he said.
Describing RBI as an extraordinarily competent and professional organisation, Sinha said: “You have to understand the institutional environment. In the institutional environment, Parliament is supreme, the Prime Minister and the Cabinet are supreme and we have to do the work that we have to do to move the economy forward.”
The minister’s statement assumes significance as shedding his hawkish stance, Reserve Bank Governor Raghuram Rajan today sprang a surprise by cutting interest rates by 25 basis point a fortnight ahead of the next credit policy, which is on February 3.
Rajan, who had focused on quelling inflation since taking office in September 2013, lowered the benchmark repurchase rate to 7.75 per cent from 8 per cent, the first reduction since May 2013.
The minister said the government has demonstrated its will for economic reforms and that signal has now been fully amplified by the RBI in terms of the rate cut and so the economy is moved through an inflection point.
On whether the government will be able to achieve the fiscal deficit target of 4.1 per cent of the GDP in the current fiscal, Sinha said: “It is not just a question of achieving the numbers, the quality of the numbers, the integrity of the accounting that stands behind them.”
The minister noted that to grow 7-8 per cent, India will have to build productive capacity and work through the supply- side bottlenecks.
He said the government has been working towards improving infra like power to help manufacturing.