Earlier this month, Rajan had sounded a word of caution about the new government's 'Make in India' campaign.
Government on Monday pledged to remove entry barriers to business and ensure a competitive tax regime to push manufacturing growth under its 'Make in India' programme, even as it blamed high interest rate for slowdown.
The programme aims at manufacturing low-cost quality products both for domestic as well as export market, Finance Minister Arun Jaitley said in New Delhi.
Criticising the monetary policy of Reserve Bank of India Governor Raghuram Rajan, he said high interest rate is the 'singular factor' which responsible the slowdown in manufacturing sector.
"The entry point into the manufacturing sector itself has to be eased. Our initial barriers have to be lowered and perhaps even removed. If we keep the doors closed, investments won't come in," he said at a "Make in India' event.
He further said there is a need to ensure liquidity in the markets. "We need to ensure capital is available, we need to ensure that those sectors which are starving we are in a position to provide adequate capital to those industries."
The success of bankers' retreat with Prime Minister Narendra Modi later this week and the 'Make In India' campaign will give a fillip to manufacturing, he added.
Jaitley also rejected Rajan's criticism of Modi's pet programme 'Make in India', saying that it is about manufacturing of quality products at low costs and it was not relevant whether they are sold in India or abroad.
"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 good quality," Jaitley said.
Earlier this month, Rajan had sounded a word of caution about the new government's 'Make in India' campaign, saying it assumes an export-led growth path of China and it should rather be 'Make for India' with a focus on manufacturing products for the domestic market.
The Governor had said he was "cautioning against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for China.
"India is different, and developing at a different time, and we should be agnostic about what will work".
Stressing on the importance of domestic manufacturing, Jaitley said: ". . . if we lose out on cost, quality then we would be threatened with a situation where in we would become nation of of traders rather than nation of manufacturers".