New Delhi: The government will focus on boosting domestic demand, finance minister Pranab Mukherjee said on Monday, as the global downturn trips up growth in Asia’s third-largest economy.
Mukherjee took over at the finance ministry when Prime Minister Manmohan Singh was admitted to hospital for heart surgery.
Meanwhile, state-run banks have assured the government of reducing interest rates in the backdrop of falling bank deposit rates, a move that would boost economic activity, especially in the cash-strapped realty, construction and auto sectors.
In a bid to boost the economy, the Reserve Bank of India (RBI) has taken a slew of measures since September last year including cuts in the cash reserve ratio and short-term lending (repo) rate to inject funds into the system and signalled a soft interest rate regime.
PSU bankers’ meeting is being held in the backdrop of the third quarterly review of monetary policy by the central bank, which observed that most banks have reduced lending and deposit rates to some extent, but there are some that are yet to do so.
The banks could take a view on the interest rate cut, which may be more than 50 basis points, and firm up steps to increase the flow of credit to industry, reeling under the impact of slowdown.
Earlier in the day, Indian Banks’ Association chairman TS Narayanasami said that banks were going to reduce interest rates and the timing of the rate cuts would be discussed at the meeting with Pranab Mukherjee.