Why have'nt the Government reduced the Interest rates?
Inflation is not the major worry now. It is down to 10.xx% and is on its way down. The crude prices have fallen dramatically. The real concern is economic growth. When the world is facing recessionary trends, it is time for India to buckle up and take the lead in Growth. Contrary to what many believe, we can still expect to have 7% growth in 2009, which is not bad by any standards and great by current global trends where developed economies are expected to show almost nil growth.
The fundamental problem is lack of confidence. Banks are not lending to each other. Investors are vary after getting burnt. The genius trioka of economists - Manmohan Singh, Chidambaram and Ahluwalia - should be out there firing on all cylinders. But instead, the response has been very timid.
The country cries for economic and political leadership, but it is not forthcoming. What we need is,
Reduction of Fuel prices - though not desirable in the long run, we need it now to kickstart the economy
Defering the implementation of Pay Commission Report - Time to tell the babus that they either perform or perish. They cant expect to get perks without sweating it out.
Reducing interest rates by at least 2.5 basis points over a period of 2 months. This will encourage people to divert more money to stock, and less to Banks. Also, consumer spending will increase. This is required to support the manufacturing base.
Tighter regulation of Stock markets and financial institutions to protect small investor to boost his confidence.
Reduce intervention of FIIs in stock market. Let them rather invest in direct equity, for then reverse flight of capital will not happen.
Finally, fasten the integration with global economy, BUT at our terms. Today, we can dictate terms being the stronger of the lot.
Will be grab this golden opportunity?
I suspect not. For our rulers are timid
