Low rates aiding growth, Rakesh Mohan

The economy is showing signs of a pick-up in investment demand, partly aided by the low interest rate regime, said Rakesh Mohan, deputy governor, Reserve Bank of India.

Mohan observed that the use of resources has improved in the economy and India's economic growth is perceived to be more efficient than the east Asian economies.

India will need to step up investment rate from the current 24-25 per cent to 32 per cent to ensure that economy grows at rates in excess of eight per cent every year, the deputy governor said after addressing a seminar on economic reforms organised by the Confederation of Indian Industry here today.

Earlier, at the seminar, he emphasised that the government needs to improve its tax collections and rationalise user charges for services to generate resources for infrastructure investment.

Public sector savings, which were positive (2.5 per cent) 10 years ago, are now negative, and the tax-to-gross domestic product ratio needs to be improved to generate resources for investment in infrastructure.

The public investment in infrastructure projects has fallen due to fiscal stress (paucity of resources) and sectors such as power were facing problems of inadequate levy of user charges and theft, he added.

Planning Commission member N K Singh said consolidation in manufacturing sector has improved competition.