Indian Commerce & Industry Minister Anand Sharma said he has asked the prime minister to consider industry’s need for credit at lower rates after the central bank raised borrowing costs last month.
Sharma told reporters in Tokyo today that he “urged the Prime Minister, who is the senior leader in my country, to look into the needs of industry, and accordingly to seek the Reserve Bank to ensure that credit remains available to industry at flexible rates, cheaper rates because we have to add capacities.”
Reserve Bank of India Governor Duvvuri Subbarao on Jan. 25 raised rates for the seventh time in a year and said the central bank will maintain its “anti-inflationary monetary stance.” The move had the support of Finance Minister Pranab Mukherjee and Prime Minister Manmohan Singh’s top economic advisers.
“There isn’t adequate comfort in the present inflation levels,” said Indranil Pan, chief economist at Kotak Mahindra Bank Ltd. in Mumbai. “It’s very difficult to see the RBI pause rate increases.”
Pan expects the RBI to boost rates by 75 basis points in 2011.
On Jan. 18, Sharma said raising rates may not be a suitable action to curb inflation.
India’s benchmark wholesale-price inflation rate stood at 8.23 percent in January. The RBI aims for inflation of 4 percent to 4.5 percent.
The central bank’s key repurchase rate is 6.5 percent.
The decision to increase rates is a “strong signal” that the RBI is keen to tackle inflation, Mukherjee said on Jan. 25. Chakravarthy Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said Jan. 7 that “some action” by the RBI may be needed to contain prices.