Ex-CEA Kaushik Basu pitches for low interest rate to boost investment and growth

Reiterating that the independence of the Reserve Bank of India (RBI) was extremely important, Kaushik Basu, the former Chief Economic Adviser to the Union Finance Ministry, said that a slightly lower interest rate regime could be beneficial to boost investment and growth.

"Independence of the RBI is extremely important. We should do everything to respect that because it gives the country long-run strength in monetary policy and inflation management. It will be very unfortunate if we tamper on that," he said on Monday evening during the launch of his book, "The Republic of Beliefs".

"I personally believe that a slightly lower interest rate regime in today's India will be beneficial (to boost investment and growth). But one thing is extremely important that this must be no more than advice or suggestion to the RBI. The final decision should be of the full authority of the RBI without any tampering on that," said Basu.

Speaking on farm loan waivers, he said that in general, it was "not a good idea" as it tends to damage credit market in the long run but it could be provided in a special situation. "Our farming sector has suffered after demonetisation in November 2016. It is a very special situation. In the West, there is a law of limited liability. You can do the favour in a limited situation."

(With inputs from agencies.)