Amid demand for softening of monetary policy to promote growth, the Plan panel on Friday said any move by Reserve Bank to lower interest rate will mainly depend on the government’s ability to contain fiscal deficit. “Interest rate is going to be determined predominately by what happens to the fiscal deficit. The industry is convinced that no matter what happens to fiscal deficit, the RBI will lower the repo rate,” Planning Commission deputy chairman Montek Singh Ahluwalia said here at an Assocham conference.India’s fiscal deficit is expected to be 5.6 per cent of Gross Domestic Product (GDP) this fiscal as against the budget estimates of 4.6 per cent of GDP.The central bank is expected to take more steps in its policy review on 15 March to ease liquidity situation to promote economic growth which is expected to moderate to 6.9 per cent in the current fiscal from 8.4 per cent a year ago.
Source: Business World
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