After Goyal, now Sitharaman calls for interest rate cut

Finance minister Nirmala Sitharaman has called for a reduction in interest rates, terming the current borrowing costs as “very stressful” for industries that are looking to expand capacities.

The finance minister’s remarks come barely days after commerce minister Piyush Goyal said the Reserve Bank of India (RBI) should reduce interest rates while calling its policy of targeting inflation with rates as “flawed.”

The back-t0-back statements from top ministers in the Narendra Modi government come as RBI has held its policy repo rate steady at 6.5% since last February, citing significant risks to the inflation outlook.

Speaking at the State Bank of India’s (SBI’s) annual business and economic conclave on Monday, Sitharaman underscored that affordable financing is vital to meet India’s growth ambitions.

“What is important is that when you look at our growth requirements, and you have so many different voices coming out and saying the cost of borrowing is very stressful,” she said, continuing, “…and at a time when we want industries to ramp up and move (to) building capacities, interest rates will have to be far more affordable.”

The finance minister’s statement comes at a time when India is grappling with stubbornly high inflation.

India’s retail inflation soared to a 14-month high of 6.2% in October, up from 5.5% in the previous month, dimming the prospects of an interest rate cut in RBI’s December meeting.

“I certainly believe they (RBI) should cut interest rates. Growth needs a further impetus,” Goyal had said at an event on 14 November in Mumbai, adding that it was an “absolutely flawed theory” to keep food inflation in mind while deciding on rates.

However, RBI governor Shaktikanta Das responded to Goyal’s remarks, saying, “The next monetary policy is coming up in the first week of December. I would like to reserve my comments for that. Thank you.”

Meanwhile, at Monday’s event, Sitharaman said the government is “handling supply-side bottlenecks and storage inefficiencies.”

Measures to stabilize edible oil and pulse supplies are part of these efforts.

She also highlighted ambitious targets for lending to small businesses, setting goals of Rs6.12 trillion for FY26 and Rs7 trillion for FY27.

For FY25, banks have been nudged to increasing lending by an additional Rs1.54 trillion.