oppn parties RBI-MPC Keeps Rates Unchanged

News Snippets

  • Government planning a loan mela to cover 400 districts in two phases
  • PM Modi says Kashmiris need a hug from all Indians
  • NPA tag will not be put on any MSME till March 20
  • Government likely to announce another economic stimulus package today ahead of the GST Council meet in Goa
  • Air Marshall RKS Bhadauria, slated to retire just a few days from now, to be the next chief of IAF
  • PM Modi slams politicians from his own party who are making irresponsible statements on the Ayodhya case and tells them to wait for the Supreme Court order
  • Telecom panel says resident welfare associations (RWA) cannot give monopoly access to any one service provider and infrastructure in public spaces and residential complexes will have to be shared by all
  • Mamata Banerjee meets Amit Shah, tells him there is no need for an NRC in Bengal
  • After 14 days, there is no hope left for reviving Vikram, the moon lander
  • CBI teams search for elusive Rajeev Kumar
  • Union minister Babul Supriyo assaulted at Jadavpur University
  • West Bengal governor's convoy not allowed to enter Jadavpur University following a blockade by Left students' union
  • ABVP supporters create ruckus at Jadavpur University in Kolkata
  • The Army conducts an operational alert exercise in eastern Ladakh
  • The IAF reopened the Vijaynagar advance landing ground, an airstrip in Arunachal Pradesh near the Chinese border
Government announces cuts in corporate income tax, stock markets welcome the decision with a massive jump
oppn parties
RBI-MPC Keeps Rates Unchanged

By Ashwini Agarwal

The MPC of the RBI has decided to hold interest rates at their current levels in its 5th bi-monthly policy review this year. Hence repo rate remains at 6 percent, despite a clamour for its reduction from industry captains and even the government. Similarly, bank rate remains at 6.25%, reverse repo at 5.75 and marginal standing facility at 6.25.

It is a sensible move on part of the MPC. The RBI had decided that inflation was the first demon it needed to tackle and had fixed a 4% rate of inflation that it could allow to happen. Since too many things have happened recently – the festival and marriage season, GST and demonetization – that have all pushed prices north and the inflation index is hovering close to 4%, there is no way the MPC could have lowered rates this time without going against its own set standards.

In any case, lower interest rates are not a guarantee for fresh investments. This is just a ruse by industrial barons to lower costs and make additional profits. If one has a good project, knows that the product will sell and has all other things in place, one will not junk, or even delay, it just because the interest rate is slightly higher. The main point is availability of funds and Indian banks are flush with funds which they can lend to good projects and clean borrowers.

The latest figures have shown that demand is picking up across all sectors. Factory output is also higher than last quarter. In such a scenario, industry should identify products that need more production and set up projects instead of waiting for lower rates. Lower rates will happen in due course. But if competitors cater to the rising demand of goods and services, those who are waiting for lower rates will be left wringing their hands.