Prime Minister’s Economic Advisory Council (PMEAC) chairman C Rangarajan said banks are expected to lower lending rates once government expenditure picks up, this would mean home loans and auto loans may become cheaper as the lending rates get slashed.
He said the Reserve Bank of India (RBI) cutting repo rate by 0.25 per cent on March 19 is a “signal”.
He further maintained allow banks transitional time to lower lending rates.
The current account deficit (CAD) in the October-December quarter in the current fiscal is likely to be higher, he said. However, Dr Rangarajan expects the overall CAD for the next fiscal to come down.
Reacting on the government cutting small savings rates today, Dr Rangarajan said it will not impact collections. The finance ministry today announced a cut in interest rates of Public Provident Fund PPF) and National Savings Certificate (PPF) by 0.1 per cent each, effective April 1.
“As inflation falls, adjustment in nominal rates required,” he added.
Dr Rangarajan said that he sees high growth potential in the next financial year. “Expect the economy to grow by 6.5 per cent in the next financial year,” he said adding, “Economic potential still very high”.
Food inflation is expected to fall as procurement picks up, he said.
Dr Rangarajan assured foreign investors that there was “no reason for unease”.
Source – NDTV