Central bank action will spur investment, growth: Jaitley
New Delhi: Welcoming the Reserve Bank of India's decision to cut short-term lending rates by 50 basis points, Finance Minister Arun Jaitley said on Tuesday this will support growth, while showing that inflationary pressures were now moderating.
The finance minister also welcomed the decision to allow the corporate sector to issue rupee-denominated bonds in overseas markets, often called "Masala Bonds", and said it will give access to additional credit for India Inc.
"Today's rate cut will boost investment and growth," Jaitley said, soon after the 4th bi-monthly monetary policy update by Reserve Bank of India Governor Raghuram Rajan, adding that the government would like to see commercial banks reciprocating with own interest rate cuts.
"We are looking forward now to the transmission of these cuts, which will help boost economy and confidence," the finance minister added.
The central bank cut by 50 basis points its repurchase rate, or the interest charged on short-term borrowings, to 6.75 percent, which automatically cut the indexed reverse repo rate, or the interest payable by the central bank on short-term deposit, to 5.75 percent.
Speaking about the rupee-denominated bonds, Economic Affairs Secretary Shaktikanta Das said there was not only an appetite for such commercial paper in the global markets, but will also shied the corporate sector from currency fluctuations.
"This is also the first time that the foreign portfolio investors can invest in state-governments backed securities, which was a demand raised by state governments for a long time," Das said, adding that could translate into an inflow of Rs.51,000 crore.