Interest rates unlikely to rise: FM

Finance Minister P Chidambaram today said that he did not expect term lending rates to go up in the face of the hike of 0.25 per cent in rep...

Finance Minister P Chidambaram today said that he did not expect term lending rates to go up in the face of the hike of 0.25 per cent in repo rates to tame inflation, saying there was enough liquidity in the market. ‘‘Banks are tinkering only with the rates for NRI deposits and some bankers say there could be some change in home loan rates,’’ he said.

The FM admitted that petro price hike was a ‘‘difficult’’ decision and that the government would take more ‘‘moderate’’ measures to contain inflation, but promised to maintain a benign interest rate regime so that growth is not stifled. ‘‘Petro price hike was a very difficult decision… Global crude oil price is not a matter under our control… These are matters people have to understand,’’ he said at the Hindustan Times Leadership Initiative conference.

Expecting high crude oil prices to start coming down by January after the winter demand, he warned that, ‘‘if oil prices do not moderate after the winter, we have to let people know that we have to live with high prices’’.

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Attributing the over seven per cent inflation to surging global oil prices, Chidambaram said, ‘‘As and when necessary, both fiscal and monetary measures will be taken to moderate inflation,’’ but in a manner that they do not stifle growth. ‘‘Unless oil prices come down, how can we expect inflation to come down below seven per cent?’’ he said, pointing to the rise in global crude oil price by 150-180 per cent during the year.

He said a benign interest rate regime, adequate credit and liquidity were of utmost importance to achieve growth which was imperative for India. ‘‘Our approach is that we must have a carefully calibrated monetary policy that does not stifle growth, imperative for achieving a higher 7-8 per cent GDP growth.’’

Regarding disinvestment, the Finance Minister said the government has not ruled out public sector disinvestment. He said there was a need to reconstruct the policy so that it became acceptable to the people and the government’s coalition partners. Once the disinvestment policy was reconstructed by, revenue should start flowing from disinvestment, Chidambaram said.

He said the government would soon arrive at a consensus on FDI. He, however, added that 98 per cent of the investment came domestically and FDI played at the margins.