Jaitley pitches for a rate cut ‘for a good fillip to economy’ | Business Line

Jaitley pitches for a rate cut ‘for a good fillip to economy’ | Business Line

My VIEW:
This refers to the report
“Jaitley pitches for a rate cut ‘for a good fillip to economy’”(November 18). The
following  observation made by the FM in
his key note address at the Citi Investor Forum in New Delhi on November 17 is
a welcome departure from the past:

“Inflation, especially food inflation, has
moderated in the last few months and global fuel prices have also come down.
Therefore, if RBI, which is a highly professional organisation, in its wisdom
decides to bring down the cost of capital, Reduction in the cost of capital, it
will give a good fillip to the Indian Economy”

Still, while the FM’s
reference was to the measures from RBI to reduce cost of capital, a section of
the media and analysts are making a narrow interpretation that ‘FM bats for a
rate cut by RBI’.

It is being forgotten
that in India interest rates stand deregulated for long now and there has not
been direct correlation between base rates of RBI and the deposit and lending
rates of banks. Even the rates offered by banks for FDs of same tenure vary by
up to one percentage point, while the interest rates charged for the same type
of loans by the same bank widely vary depending on risk perception and other
relevant considerations.
RBI has received this
endorsement of its professional competence from a competent Finance Minister at
the right time.

M G Warrier, Mumbai

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