New Delhi: Amid India Inc blaming the high interest rate regime for decline in industrial output growth, Planning Commission deputy chairman Montek Singh Ahluwalia on Friday said there is no connection between the two.
“I would not draw any connection between the rate hike and decline in industrial production. The rate today is roughly what it was when the economy was growing at 9%,” Ahluwalia said when asked if RBI’s tight monetary policy was hampering industrial production.
Planning Commission deputy chairman Montek Singh Ahluwalia. (File photo)
The Reserve Bank of India has hiked interest by 3.75% since March 2010 to tame inflation, which is hovering at around 10%. The high interest rate regime has made credit expensive for corporate as well as consumers, which the industry says has hit growth.
Ahluwalia, who was talking to reporters on the sidelines of a Ficci meet, said there are other global and domestic factors that are affecting factory production.
“I do not think the slowing down (of industrial production growth) should be attributed to only the short-term interest rates,” he said.
The Index of Industrial Production (IIP) has slipped to a low of 1.9% in September, as per the latest data released here. It was 6.1% in September last year.
“We are concerned that the pace of growth in the economy has gone down. But it (IIP data) is only a one month affair. We need to bring this up,” Ahluwalia said.
Apex industry body CII on Friday blamed the high interest rate regime for slowdown in IIP.
“This probably reflects the impact of RBI’s interest rate hikes together with the continuous rise in inflation. With the global economic scenario also deteriorating, the RBI should not only pause but begin to reverse its interest rate hikes,” CII director general Chandrajit Banerjee said.
The top Planning Commission official emphasized upon the need to ensure that growth is revived in the next fiscal.
“We have to make sure that in the next year the economy recovers from what is clearly a slower growth phase in the current year,” Ahluwalia said.
On whether RBI would go in for another round of rate hike as inflation was still high, he said, “I think, as of now, actions taken have been commensurate with the objective of trying to bring inflation under control. Looking forward, I do not want to speculate.”
In its last monetary policy, the central bank had hinted that it may not hike interest rates at the next meeting in December.