The Finance Minister Arun Jaitley has once again given a signal to the Reserve Bank of India to cut interest rate. The RBI has maintained the benchmark repo rate (the rate at which banks borrow from the central bank) since January this year.

“The cost of capital and, I think, in recent months or years, is one singular factor which has contributed to the slowdown of manufacturing growth itself,” Jaitley said while addressing a national workshop on ‘Make in India’ here on Monday.

The manufacturing sector recorded a negative growth of 7.6 per cent in October while overall industrial production registered negative growth of 4.2 per cent in October.

“The credit offtake is slow, infrastructure creation becomes slower, the manufacturers find it difficult to afford costly capital, because it is going to add to each one of their costs. And, therefore, this is one area where each one of us has to be concerned about,” the Minister said.

After both retail and wholesale inflation dropped to record lows and the Finance Minister pitching for rate cut earlier, the RBI disappointed everyone on December 2, by leaving policy rates unchanged.

Policy stability

Criticisiing the previous UPA regime for creating uncertainty in business environment, he advocated policy stability. “We can’t have a policy which is occasionally changed and half way through our businesses, we find that there is different policy.… retrospective taxation, because of the absence of stability, became a defining moment against India globally,” he said.

Talking about ease of doing business here, he said not only entry barriers have to be lowered, there is also a need to provide an enabling environment to continue doing business here.

“We have to ask ourselves why each investor is today insisting on international arbitration where the venue is not India. It is because our domestic systems have a tendency to interfere too much in the domestic tribunals/international tribunals created for the purposes of dispute resolution mechanism,” he said referring to arbitration issues in cases such as Vodafone.

On September 25, Prime Minister Narendra Modi launched ‘Make in India’ with an intention to boost manufacturing which in turn will also create more and more jobs. It has identified 25 sectors under the mission. Now, the Government is working to prepare a short term (one- year) and medium term (three-year) action plan to make this mission successful.

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