Interest rate cut needed for growth: Montek

Planning Commission on Tuesday pitched for lowering of interest rate to boost economic growth which is beginning to look up after moderating to 5.4 per cent in the first half of the current fiscal.

"Over a longer period of time, steps are needed to bring down the interest rate. RBI looks at these things independently and we should give them freedom to decide (about interest rates)", Plan panel Deputy Chairman Montek Singh Ahluwalia said while commenting on Reserve Bank's mid-quarter review.

RBI has chosen to keep all key rates and ratios unchanged in its policy review unveiled earlier in the day.

The deceleration in growth has bottomed out and the second half would be better, Ahluwalia said, adding, "They (RBI) have decided to take no action. The economy is beginning to turn around.

"Everybody should support the revival of growth".

On the Finance Ministry's economic growth projection of 5.7-5.9 per cent in its Mid-Year Economic Analysis, he said, "I don't think that this is an unreasonable forecast. That is reasonable assumption."

The Finance Ministry in March had projected a growth rate of 7.6 per cent for the current fiscal.           

Noting there is excessive focus on repo rate, Ahluwalia said: "I think as we bring down the fiscal deficit, the resources which are flowing into the financing of fiscal deficit, will flow back into the economy. That will bring about softening of interest rate."

The government is taking steps to promote infrastructure sector projects, he said, adding "if the financing does not flow then a lot of this action will become infructuous.

"There is some time for that and RBI looks at these things constantly. I think that they would be watching this space."