India's Economic Growth Requires Affordable Interest Rates

NEW DELHI (Reuters) – India's economic growth requires "far more affordable" bank interest rates, according to Finance Minister Nirmala Sitharaman.

At an event in Mumbai, she emphasized the need for affordable rates to encourage industries to ramp up and build capacities. Recently, the trade minister suggested that the Reserve Bank of India (RBI) should cut interest rates to boost economic growth and ignore food prices when shaping monetary policy.

These statements come in response to rising retail inflation driven by vegetable price increases, which have dimmed expectations for an interest rate cut in December. Sitharaman noted that inflation can be volatile due to supply-demand constraints and refrained from commenting on the inclusion of food prices in the inflation targeting framework.

Earlier, India’s top economic advisor advocated for excluding food prices from inflation targets, a point supported by Trade Minister Piyush Goyal. Persistently high food inflation has strained middle-class budgets, leading to reduced urban spending and threatening overall economic growth.

Sitharaman assured that there is no reason for undue concern, reaffirming the government's determination to keep the economy on track.