Former RBI chief says: "Interest rates will harden by the end of year”

C Rangarajan former Reserve Bank Governor stated by the end of the year the interest rates are likely to increase and said the country economy will witness a growth of 6.5 to 6.7 per cent in 2009-10.

He stated, "Interest rates will harden by the end of year," and pointed out that in the second half of current fiscal Indian economy is definitely going to show strong improvement which in turn will lead to increase in demand for credit by industry.

Rangarajan, was giving a lecture on `International financial crisis and its impact on India' for MPs, in his speech in regard to the borrowing program of the centre, said, "as long as the private demand is not picking up, the government will be able to borrow at the same rate."

During the current fiscal the government had planned to borrow Rs 4 lakh crore from the market.

Currently Rangarajan is Rajya Sabha member. He said the effect of massive borrowing program of the government will be visible on the corporate world in the next fiscal and can lead to "crowding out" of capital.

Regarding the growth prospects for the current fiscal he said, economy is likely to grow by 6.5 to 6.7 per cent. He said during 2010-11 there are chances of economy to register a growth of up to 7-8 per cent and added "we would not be able to go back to 9 per cent GDP growth rate, unless the world economy recovers."