Finance Minister P Chidambaram today said that “there is scope for interest rates to drop.” In a post-Budget interaction with the National Council of Confederation of Indian Industry, he said that interest rates continue to be the most effective way to contain inflation, notably when capital inflows remain robust.

Even though interest rates are within the purview of the Reserve Bank of India, the Government has conveyed its concerns from time-to-time to the central bank.

Inflation does, however, remain one of the top government concerns. “We have to be flexible, given that the goal is to achieve close to 9 per cent growth and contain inflation at close to 4 per cent,” he said.

In a written statement in Parliament earlier in the day, Chidambaram pointed out that inflation in India stood at an average of 5.7 per cent during September 2007-January 2008 which was higher than inflation in US, UK, European countries and Japan for the same period. But he noted it was lower than China’s 6.6 per cent for the same period.

On disinvestment, he said that due to “political reservations” the Government had not been able to take it up, but that could change depending on the response to the listing of the Rural Electrification Corporation. “There is a distinct possibility that disinvestment may start. We intend to disinvest many CPSEs depending upon the appetite of the markets. If REC lists strongly, we can do it one by one,” he said.