Tough economic steps needed to clear hurdles

Home > Business > Article

India?s fast growing economy needs a strong support from the government and RBI in these recessionary times. Generating faith amongst the investors and common man is what is required. But for now the RBI would do anything to defeat inflation

CJ: Praveer Sinha

Tue, Mar 03, 2009 14:17:52 IST

Views:
799
Comments:
0

Rate:

0.0 / 0 votes

India News Today :

THE HARD steps taken by the RBI in reviewing the credit policy is against our expectations. It was believed that RBI wouldn’t interfere with the interest rates for now and let the economy recover by itself or even if it makes a hike then that would be an insignificant one. But one more time, the RBI has made a significant increase in the Cash Reserve Ratio (CRR) and repo rate. There is no option of getting away with this.

Everything that can be purchased through loan would now become dearer. It is tough times for those who have taken home loans because the process of increment in rates is not going to be stop. But it will affect everyone as the movement of economy is associated with the credit.

The pace of industrial production is getting slower and after this increase a section of economist are of the opinion that the growth rate of GDP will come down to 7 percent. It means that we will see a fall of 1.5 percent in GDP. The result of this hike will soon to be felt on employment and income. It’s true that RBI is not the only one to be blamed. Whenever inflation gets out of control then such monetary measures are taken which are required to tame demand by increasing interest rates in order to lower the prices.

But it’s not simple as that. The inflation we are witnessing now is because of difficult global economic situations result in higher crude oil prices and other commodities. India has no control on these things so chances are that our credit policy would be of no use. If this happens then it will cast a bad impression on our economy because along with inflation we will also be pushing ourselves to lower growth rate. The other issue is that complete results of steps taken by the RBI earlier are not out yet. They should have waited for the results as a small drop in inflation was seen in past few weeks.

It’s also true that interest rates wouldn’t play their part until the rupee is allowed to be stronger. If rupee depreciates and interest rate appreciates then credit will come from outside which results in increase in demand and subsequently the inflation. But for now the RBI appears as if it would do anything to defeat inflation. No one has an objection on this, but damaging rest of our market and economy is a fear which will continue.

E-mail |

Print | Post comment