Chennai: A day ahead of the Reserve Bank of India's monetary policy announcement, Finance Secretary Arvind Mayaram suggested on Monday that the economic conditions were becoming favourable for a cut in interest rates.
"Conditions are becoming favourable for a more benign monetary policy going forward in this year," he said at an event of the Madras Chamber of Commerce & Industry in Chennai.
Mr Mayaram argued that the wholesale price-based (WPI) inflation is at the lowest level since October, 2009 and retail inflation, which is based on consumer price index (CPI), is less than 8 per cent, which is the target for this year according to an RBI panel report.
He further said that current account deficit has been brought down substantially and this has also been acknowledged as of the key credit strength by S&P in its recent report.
The RBI, which has kept key interest (repo rate) high at 8 per cent for quite some time now, is scheduled to come out with its fourth bi-monthly credit policy on Tuesday, September 30.
The Finance Secretary also exuded confidence that Indian economy will clock a growth rate in the range of 5.7 to 5.9 per cent during the current fiscal year 2014-15. India's GDP had slumped to sub-fiv per cent growth levels in the previous two financial years.
"An upgrade by S&P in the overall outlook from negative to stable reaffirms the fact that the health of the economy is in a much better condition than it was a year ago," he said.
Noting that in the past, large projects had come to standstill and many others were stressed on "slow decision making and paralysis", Mr Mayaram said infrastructure development is one of the foundations on which the current government wants to accelerate growth and create job opportunities.
"Signs of recovery are visible in the sector, albeit slowly."
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