Finance Minister Nirmala Sitharaman said the Reserve Bank of India is not synchronising rate hikes with advanced economies but is keenly watching the Indian economy and the global movement of capital before taking a call.
The finance minister said interest rates are always a balancing act, as a lower rate might suit borrowers but not necessarily senior citizens and middle-class depositors.
The western central banks are responding in a synchronised way to interest rate hikes because their rates have remained low in the past, she said. "In emerging economies, the situation is very unique to each market... the RBI is watching the Indian economy and taking a call as in when it is required."
The Chief Economic Advisor Ananth Nageswaran said that rising interest rates is not necessarily a problem as the economy is recovering but an opportunity for both borrowers and depositors, during a post-budget interaction in Jaipur.
Nageswaran said, "Higher interest rates are not usually only a sign of a problem, not only a sign of cost but it is also a sign of recovering economy and higher demand for credit, which will naturally raise the cost of capital so returns are also going up..."
'Era Of Free Capital Flowing Into Loss-Making Enterprises Over'
One fallout of this global tightening is that the "era of free capital flowing into loss-making enterprises seems to be coming to an end", according to the finance secretary.
"Previously, it was a temporary era when there was a very loose credit policy in foreign countries and where money was chasing these kinds of investments," TV Somanathan said at the event. "From now on, startups like other businesses will stand on their own feet in terms of good products and profitability rather than just on free capital."
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