For the first time in four months, finance minister Arun Jaitley has called for a reduction in interest rates, saying lower rates would trigger demand for homes.
"Currently, interest rates are a disincentive. Now that inflation seems to be stabilizing somewhat, the time seems to have come to moderate the interest rates," he told TOI in an exclusive interview.
The Reserve Bank, which has kept rates unchanged, has maintained that despite recent moderation, inflation remains a challenge.
Jaitley indentified two key concerns of the government regarding the economy. The first was low credit offtake, and the second, tepid performance of the manufacturing sector. He said banks have been inhibited by the doubtful loans (NPAs) on their books, and this had created "defensive banking".
He disclosed that the Prime Minister would shortly call a meeting of bank chiefs and urge them to be more liberal with credit, while assuring them of full support. That would be the first time that Modi will meet bank chairmen on accelerating credit flow. The talks come in the wake of bank credit growth slowing to a 13-year low.
On manufacturing, he listed it as a "key concern". "The big worry is the manufacturing sector. That is why the Prime Minister is giving an impetus to the manufacturing sector. We need investments and we need to create an environment of low cost quality manufacturing," he said.
While listing the government's recent reform record — from the coal ordinance to gas pricing, diesel price deregulation and de-licensing of goods that can be manufactured by private sector - Jaitley pointed to the need for reworking the land acquisition law, which is said to be holding up investment. "The farmers are admittedly entitled to a higher compensation but the entire development process can't be brought to a standstill for want of land requirements," he said.
On the black money issue, the finance minister said the government will disclose the names of people who have stashed unaccounted money in overseas accounts once it files for prosecution and reiterated that it will honour its commitments under bilateral tax treaties. "Our objective on this is not political our objective is to find out the names make them public according to the treaty requirements," said the minister, who had put the Congress on the back foot earlier this week by stating that the party would be embarrassed if the names revealed.