NEW DELHI: What was earlier said in private is now coming out in the open. On Monday, finance minister Arun Jaitley said the Reserve Bank of India's insistence on keeping high interest rates as the "singular factor" responsible for the slowdown in the manufacturing sector. He also rebutted governor Raghuram Rajan 's critique of Narendra Modi's 'Make in India' initiative, setting the stage for a fresh round of tussle between the central bank and the government.

"Whether 'Make in India' is made for consumers within India or outside is not so relevant. The principle today says that consumers across the world like to purchase products which are cheaper and are of good quality. They hire services which are cheaper and of good quality," Jaitley said while launching a workshop on Make in India.

Earlier this month, Rajan had suggested that the government should focus on "Make for India" – in other words, shape manufacturing that is targeted at the domestic market rather than the global market where demand was growing limp. The apparent caution sounded on the Modi government's key initiative obviously didn't go down well in New Delhi.

In his address at the workshop, the Jaitley identified interest rates, taxation policies, infrastructure bottlenecks and entry barriers as factors hampering manufacturing activity in the country and promised more steps in the coming days to deal with the challenge.

Since he first called for a rate cut in an interview to TOI on October 25, the finance minister has repeatedly advocated a lower rate regime in the wake of slow economic growth as well as low inflation, a call that found an echo during the winter session of Parliament. RBI has, however, refused to pare policy rates arguing that it would prefer a stable inflation scenario.

The Indian economy is expected to grow by around 5.5% this fiscal year and retail inflation was at a record low of 4.4% in November, along with zero wholesale inflation.

On Friday, Rajan told a TV channel that he can't be adjusting rates every time inflation moves up or down. "The message I have been sending is that we don't want to flip-flop back and forth. This month inflation was 2%, therefore, I will cut this much. Oh! It went up to 5%, maybe I should increase it. That's not how a central bank operates," he had said.

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Jaitley's statement on interest rates comes ahead of the Bankers' Retreat over the weekend where he, Modi and Rajan are scheduled to work out a roadmap for healthier state-run banks.

Before the tussle broke out in public, the government and RBI differed on appointing a chief operating officer, which the central bank had sought to push through a board resolution on the Budget day – the day when finance ministry officers would have missed the board meeting. Subsequently, the finance ministry made it clear that the issue could only be dealt with by amending the law.

In recent weeks, there have been reports of Rajan moving to BRICS Bank as its first president, something that government officials have denied.