A day after Prime Minister Narendra Modi announced cheaper loans for the poor, lower middle-class and small businesses, finance minister Arun Jaitley on Sunday said providing capital at affordable rates using the black money that has come into the banking system will be on the future agenda of the government.
In a New Year video message through Asian News International (ANI), Jaitley said the influx of deposits spurred by the demonetisation of Rs1,000 and Rs500 notes would increase the lending capacity of commercial banks and lower the cost of capital.
“I see 2017 as a year whose agenda has been set last night by the prime minister. Cheaper loans for affordable housing, for women’s health, agricultural sector, for MSME (small and medium enterprises). Therefore, cheaper capital and transfer of this wealth which had been hoarded as black money now for cheaper capital in these areas is the future agenda of the government,” he said.
Jaitley said a combination of implementation of the goods and services tax (GST) , preparations for which are progressing satisfactorily, and a digitized economy will be the future of India. “And they will lay down the footsteps for further growth in India and India will continue to maintain its pivotal position in the world,” he added.
Prime Minister Modi, in his address to the nation on Sunday evening, said the country had gone through a “purification ritual,” referring to the demonetisation drive that ended on 30 December.
Modi, in an address lasting around 45 minutes, announced two housing schemes for the urban poor and lower middle class. From 2017, for housing loans up to Rs9 lakh, the government will provide 4% interest subsidy, while for housing loans of up to Rs12 lakh, a 3% interest subsidy will be given.
Similarly, for the rural poor and lower middle class, those willing to build houses or expand their existing homes will get an interest subsidy of 2% for loans up to Rs2 lakh.
For micro, small and medium enterprises, the government will provide a credit guarantee of Rs2 crore, up from Rs1 crore at present. The government will provide this guarantee to banks through a trust that will also cover loans extended by non-banking financial companies (NBFCs).
The Reserve Bank of India (RBI), on 7 December, surprisingly kept its interest rates unchanged, holding that crude oil prices may firm up in the coming months.
“Volatility in crude prices and the surge in financial market turbulence could put the inflation target for Q4 of 2016-17 at some risk,” it said.
India’s retail inflation softened for the fourth consecutive months to 3.63% in November from 4.2% a month ago, as a squeeze in cash availability impacted prices of perishable commodities.
RBI is aiming to keep retail inflation at under 5% in the fourth quarter and 4%, within a band of 2% on either side, in the medium term.
Jaitley said the finance ministry will do its best to implement every word of what the prime minister announced on Sunday.