P. Chidambaram in New Delhi on Tuesday. Picture by Prem Singh

New Delhi, March 4: Finance minister P. Chidambaram today said there was scope for reducing interest rates.

Chidambaram’s view on interest rate comes two days before a meeting of the board of governors of the Reserve Bank of India here.

At a Confederation of Indian Industry meeting on the budget, the finance minister said the government would keep economic growth close to 9 per cent and inflation near 4 per cent.

“There is scope for deposit rates and interest rates (on lending) to drop further. I have impressed upon banks that they must extend more loans for consumption and to the retail segment.”

He said there would not be any rollback of the budget proposals, but if there had been inadvertent mistakes, they would be addressed.

He said the budget was aimed to spur consumer demand. “It is consumption that drives production and it is production that drives investment, I believe there is a need to give a stimulus to the manufacturing sector.”

On the farm loan waiver, the minister said it was a one-time emergency measure and not a cure for all the ills in agriculture.

The reduction of the central value added tax (cenvat) rate to 14 per cent and that of central sales tax by 1 per cent was to signal a movement towards a goods and services tax.

Chidambaram said the cenvat rate was also cut to stimulate growth.

The government has decided to list many more central public sector enterprises. However, none of the navratnas will be considered for divestment because of political opposition.

On subsidies, Chidambaram said the cabinet would soon take a final decision on the nutrition-based subsidy, recommended by the group of ministers on fertilisers.