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Interest rates to remain low: Kelkar

March 02, 2004 16:32 IST

With improvement in the fiscal status of the Union government, interest rates will continue to remain low over the long term, according to Vijay Kelkar, advisor to Union finance minister.

"The government was improving its discipline in fiscal management, putting less pressure on markets for resources, and interest rates will continue to remain low over the long term," he said at the two-day emerging market seminar organised by Capital International in Mumbai on Monday.

The fiscal stress was not just restricted to the Centre but state governments were also facing financial problems due to declining revenues of the Union government, he said.

"The tax to gross domestic product ratio has also lagged behind. But now, the situation would change with levy of tax on services sector, which have over 50 per cent share in the Indian economy," Kelkar said.

The upswing in the business cycle would also help to bring in additional revenues to the Centre's kitty, he said.

On the growth of the Indian economy, he said the saving rates and improvement in productivity would enable it to grow at 10 per cent over next two decades.

The GDP has grown at 6 per cent up to 2002 and the economy was expected to grow at about 8 per cent in the current fiscal, Kelkar added.


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