Rate cut on par with trend: Arvind Subramanian

New Delhi: Chief economic advisor Arvind Subramanian welcomed rate cut by RBI and said that a recovering economy needs policy support and the reduction in interest rates this year was consistent with trend in economy including strongly declining inflation.

He also said that the government and RBI agree that these cuts in interest rate signify that the economy needs policy support as economic growth is recovering while the external environment remains weak. Mr Subramanian played down inflation worries arising out of below normal monsoon rains saying the government will act to contain price rise risks.

“These cuts are consistent with the trends in the economy including strongly declining inflation, contained current account deficit and ongoing strong fiscal discipline,” said  Mr Subramanian. The chief economic advisor also said that both the institutions will work together to ensure that the macroeconomic remains strong while investment and growth are accelerated towards their potential.