High real rates may push RBI to shift toward easier policy to boost growth

A sharp decline in India’s consumer prices is pushing real rates of interest to the highest in Asia, boosting expectations that the new central bank governor will shift gears to an easier monetary policy setting to support economic growth.

Economists see high real rates -- or inflation adjusted -- as a threat to investment in an economy gripped by uncertainty before a general election next year and a crisis in the shadow banking sector that’s hurting domestic consumption.

“Number of factors are currently impinging on investment: weak external demand, high real interest rates, low capacity utilization and leveraged corporate balance sheets," economists