Profound nature of Indian Interest Rates and consequences

Mr. Cherian beautiful insight.  In a bid to contain inflationary trends, India’s central bank raised interest rates once again. 9% growth rate as claimed by the Govt. is not at all achievable in the present scenario.  So, the policy makers are now sending signals opposite to their maintained stand till date. The raising prices of essential commodities and others is the major concern.  Govt. is unable to find a solution to it. 

I dont believe the only monetary policies are enough to find solution to this problem. There are many structural inefficiencies in the system. To bring down the inflation, these structural inefficiencies have to be plugged. For this a whole gamut of administrative measures have to be taken up. But, the Govt. seems have no plans to plug these structural inefficiencies and looking at the RBI to control the inflation.  FM needs some constructive strategies, but he wants a magic wand. Who is going to help him.

Good insight Mr. Cherian.  Indian interest rates are expected go up further by 25 basis points taking the rate upto 8% and will remain stagnant until December 2012.  Though the policy makers have agreed to live with lower growth rate which was caused due to marked slowdown in investments and consumption pattern, but they still believe that macro economic fundamentals of the economy are strong and growth will pick up.  Another pointer to be taken here is rising crude oil prices and food inflation have been the major drivers of inflation in India with the rise in wholesale price index.

You have correctly pointed out that handling such volatile situation is not in the hands of educationists, and no straight theory or quoting past practices will come handy in such a situation to teach the aspiring students.  Within a short period of taking any assignment, after college, they would either go bankrupt or fend for themselves begging in streets.