New Delhi: India will continue to pursue a twin policy of keeping inflation rate in check and maintaining a soft interest rate regime as part of efforts to bring the Indian economy at par with the best in the world.

"Despite all the uncertainties in the economy, we have consciously followed a policy of low inflation rate. It will continue to be our policy to have a low inflation rate and a low interest rate regime," Finance Minister Yashwant Sinha told reporters after a conference organised by United Bank of India.

Referring to the criticism of adverse effects of lower interest rate regime on small depositors, he said there was a need to align interest rates with the inflation rate so that the real lending rates come down in the economy.

Reserve Bank Governor Bimal Jalan had also said that Central bank will continue with the "soft interest rate" bias and reduce bank rate if liquidity situations demand so.

Pointing to the 1.6 per cent inflation rate in 2001-02 and the bank rate of 6.5 per cent, Sinha said, "This (low inflation and interest rate) is a paradigm shift from the earlier days of high inflation and high interest rates. Now you can compare our economy with the best economies."

High inflation rate also makes it difficult for the government to reduce tax rates, he added.

Sinha also said the country now has a "comfortable" balance of payments situation, which had undergone problems in the early 1990s.

PTI