Rate cut worth a debate

The report, “Corporate India says rate cut not enough” (August 4) by Arnab Dutta, Ajay Modi, Shubham Parashar and Amritha Pillay is worth a good debate. 

The Reserve Bank of India (RBI) Committee on Monetary Policy did not have a unanimous opinion on rate cut. It is hard for two economists to agree on one rate cut; each one will have his or her thesis on it. So what figure for the rate cut is the most appropriate to jump-start industrial growth? I am not sure there is a single answer to this. 

In some countries what impact a zero rate had on growth is known. Industrial growth is the result of several governing factors such as the demand side, liquidity, inflation, disposable incomes and interest rates. The last factor is just one of them. The RBI has been doing its best to spur growth by managing the rate period to period; pressure on the central bank to cut more would be counterproductive.

                 N Subrahmanyam   Hyderabad Letters can be mailed, faxed or e-mailed to: 

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