Interest rate certainty in lost high hopes on growth projection

Abstract

For the last 5 years the government was quiet comfortable with Flexible Inflation Targeting instead of using discretion of targeting inflation in previous days when Inflation print was available still gives RBI much headroom to keep the interest rate under control. Most of the time in the last five years though real interest rates were positive but the way government has convinced RBI means that it is the Government which has to lead the economic growth. Private sector has to crowd in is the thinking prevailing as of now. Since the private consumption has stopped rising further for many years due to weaker push which could be given to people in the base of the pyramid as a result of which there is perceptible fall in the service demand and manufactured goods. Business opportunities are curtailed because of the States after 2014 are trying to see which way these are politically stable. Economics narratives are disturbed when there is change in the government. It is almost sure that interest rates could not swing too far beyond 6 percent and right earnestly the growth rate optimism is not hyped. Even 6 percent growth in these circumstances can give better complacency.