Arun Jaitley refutes reports suggesting possible differences with RBI governor

NEW DELHI: Finance minister Arun Jaitley criticised media reports on his Monday speech at the Make in India workshop for suggesting he had differences with Reserve Bank of India governor Raghuram Rajan on interest rates. “What is reported is a speech that I did not deliver,” he said in a Facebook post headlined, Reporting with an agenda. Journalists were looking for “angles” where none existed, he added.

The RBI governor has not cut rates despite inflation slowing sharply, creating room for such a reduction to lend strength to faltering economic recovery. Rajan has said he wants to win the battle against inflation before easing up on rates even as the government has repeatedly flagged the high cost of capital.

In previous instances, during which he has made a point about high interest rates, the finance minister has also added that this was a matter that the RBI alone would decide. “I am sure that the authorities who are competent to deal with it are fully seized of this view notwithstanding the balancing exercise between inflation management and growth which they have to do,” he had said in reply to a demand for rate cuts earlier this month in the Lok Sabha.




Jaitley said he had made no reference to the RBI in his Make in India address. “The reports indicated that I had spoken on the Reserve Bank, its governor and voiced differences with them. The fact is that there was not a single sentence reference (not even a word) in my entire speech on either RBI or its governor,” the minister said in his post on Tuesday morning.

In his speech, Jaitley had said: “The cost of capital and I think in recent months or years, this is one singular factor which has contributed to slowdown of manufacturing growth itself.” The finance minister blamed what he called “competitive journalism for the misinterpretation of this line. “The report of this speech in several sections of the media convinces me that in the competitive world of journalism, reporters are always looking for an ‘angle’. Where none exists, the speech itself can be twisted to create one,” the finance minister said in his Facebook post. He said cost of capital was one among many things suggested by him to revive manufacturing.

“The key point I made was that our manufacturing has to be cost and quality competitive. I suggested various steps which were essential to achieve that. One of the many points that I made was that the cost of capital has to be cut down,” he said. “Anyone speaking on the subject of Make in India into a manufacturing hub would necessarily suggest this.”

RBI has now kept the key policy rate unchanged for nearly a year after raising it by 25 basis points to 8% in January. Retail inflation has slowed from 8.8% in January to 4.4% in November, while wholesale inflation has dropped to zero from 5.1%. High interest rates were a visible point of difference between the RBI, under then governor Duvvuri Subbarao, and the previous UPA government.