The Planning Commission Deputy Chairman Montek Singh Ahluwalia today allayed fears over significant hardening of interest rates in view of the high government borrowings, pegged at around Rs 4.5 lakh crore this fiscal.
"I think the only fear we will have is that the fiscal deficit is high... It is not going to be high. It would be brought down next year. In view of that, I don't expect to see any significant hardening of interest rates," Ahluwalia said.
"This fear of interest rate hardening is actually based on an area concerned about the size of fiscal deficit, I think the fear that the fiscal deficit will remain high in subsequent years is not correct," he added.
The Budget has made it amply clear that there are good reasons why fiscal deficit is high this year. It would come down next fiscal and come down again a year after, he said.
The Fiscal Responsibility and Budget Management (FRBM) papers has projected fiscal deficit to come down to 5.5 per cent next fiscal and four per cent a year after against 6.8 per cent estimated for the current fiscal.
"A lot of this fear about rising interest rates is the expectation that the government will keep on borrowing."