New Delhi: Finance Minister Arun Jaitley on Friday described the decision of RBI to cut key policy rate by 0.25 percent as an "important turning point" and hoped it would engender faster growth.
"After two years that interest rates are going to move downwards and market reactions also have been much better. I think this will leave somewhat more money in the hands of consumers. Hopefully (it will) increase spendings, make loans cheaper," he said.
Softer loans, Jaitley said, will encourage faster growth of consumers goods sector which has been witnessing relatively slower growth in the last two-three months.
In a surprise move, the RBI yesterday cut its policy rate by 0.25 percent in the first reduction in 20 months and promised more, paving way for cheaper home and auto loans as also lower cost of funds for corporate borrowers. Within hours of the announcement, state-owned United Bank of India and Union Bank of India cut their lending rates by the same margin and other banks are likely to follow suit.
"It's a welcome (decision)," Jaitley said while speaking at the Economic Times Global Business Summit, adding, "there can be various opinion to when the cuts are required and when they are not required. We had a debate on this. I am glad...It's an important turning point."
Jaitley further said that the government would endeavour to strengthen RBI so that it can become more professional and grow as an institution.
Admitting that tax issues were hampering flow of foreign investment, Jaitley said he was seized of the matter and was looking into the suggestions made by the investors.
"One of the reasons (for reluctance of NRIs to return to India) ... Is tax climate ... The issue is under serious examination," he said, while referring to his meeting with a group of entrepreneurs from Singapore.
Responding to a query on the proposal to replace income tax with banking transaction tax, he said, it was not possible till the nation moves fully to plastic currency.
He further said that government was seriously examining a proposal to incentivise use of debit card by providing marginal tax incentive.
The Finance Minister is currently engaged in preparation of his first full fledged budget to be presented in the Lok Sabha next month.