Finance Minister Arun Jaitley has differed with the RBI Governor Raghuram Rajan’s monetary policy and criticised the Central bank’s stance on retaining the interest rate despite lowering of inflation trajectory.
“Interest rate is the “singular factor” which is responsible for the slowdown in the manufacturing sector,” Jaitley said in what is seen as a clear signal to Rajan about the Government’s view on the monetary policy.
Pledging to remove entry barriers to business and ensure a competitive tax regime to push manufacturing growth under its ‘Make in India’ programme, Jaitley blamed the high interest rate for slowdown in the manufacturing sector. “We need to ensure that capital is available. We need to ensure that for those sectors which are starving, we are in a position to provide adequate capital to those industries.”
The success of bankers’ retreat with Prime Minister Narendra Modi later this week and the ‘Make in India’ campaign will give a fillip to manufacturing, he added. Jaitley also rejected Rajan’s criticism of Modi’s pet programme ‘Make in India’, saying that it is about manufacturing of quality products at low cost and it is not relevant whether they are sold in India or abroad.
“Whether ‘Make in India’ is for consumers within India or outside is not so relevant. The principle today says that consumers across the world like to purchase products which are cheaper and are of good quality. They hire services which are cheaper and good quality,” Jaitley said.
Earlier this month, Rajan had sounded a word of caution about the new Government’s ‘Make in India’ campaign, saying it assumes an export-led growth path of China and it should rather be ‘Make for India’ with a focus on manufacturing products for the domestic market.
The Governor had said he was “cautioning against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for China. India is different, and developing at a different time, and we should be agnostic about what will work.”
Stressing on the importance of domestic manufacturing, Jaitley said: “... If we lose out on cost, quality then we would be threatened with a situation wherein we would become a nation of traders rather than a nation of manufacturers.”