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Why the Reserve Bank needs to change its stance on interest rates
New Delhi, Jan. 11 -- Interest rate is a very important variable in any economy. It impacts investments by entrepreneurs for creation of capacities, i.e. growth, it impacts financial investments, and retail borrowings for consumption purposes, e.g. house, car, etc. The fulcrum for deciding the spectrum of interest rates in our economy is the RBI repo rate, currently at 6.5%, which is taken as the signal rate for the ecosystem. On its part, the RBI looks at many factors for deciding the repo rate, the most important parameter being inflation, as the real interest rate in the economy should be positive in the interest of savers. Other factors are GDP growth rate, currency exchange rate, global interest rate movement, etc. Apart from the signa...
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