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Cost of capital hurting domestic private investment: Jaitley

September 21, 2015 14:04 IST

Pitching for greater overseas investments to drive India's economic growth, Finance Minister Arun Jaitley on Monday said domestic private sector investments have been slow and high cost of capital was also affecting several sectors.

He expressed confidence however that domestic companies, which were working with some "constraints" in the wake of a global demand slowdown and excess capacities they had built up, were capable of overcoming these challenges.

Addressing global investors in the international financial centre, Jaitley said the government is continuing with its reforms agenda, although it still has a lot of distance to cover in terms of changes and reforms.

"The cost of capital is still high and therefore its impact on infrastructure and manufacturing and its impact on real estate sector which is an important engine of growth in India is itself being felt," he said.

Later, when asked by reporters about his expectations from the Reserve Bank of India's next monetary policy move, Mr Jaitley said, "Let us leave it to RBI".

RBI, which has cut its policy rate thrice so far this year by 25 basis points each, is scheduled to hold its next monetary policy review on September 29 and there are high expectations for a further rate cut.

Talking about the areas of concern, Jaitley told investors that one of the key issues is that the "domestic private investments have been somewhat slow".

"This is one account of the fact that excess capacity had been built in the past and therefore a large number of domestic companies are working with constraints in the wake of global demand slowdown.

"But once the domestic demand builds up, I am sure our companies are quite capable of overcoming this challenge," he added.

Photograph: PTI

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