Lower interest rates not helping the economy
In past couple of years, there has been a strong demand for cut in the interest rates. The cacophony rises multifold closer to the scheduled meeting of the monetary policy committee (MPC) of RBI. Many experts have been persistently citing lower rates as panacea for accelerated economic growth. In past five years, since July 2015, RBI has halved its benchmark repo rate 8% to 4%. Despite this we have not seen any signs of acceleration in economic growth. The credit growth has remained low and is expected to plunge to zero by end of this year; as the supply of money (deposits) continue to outpace the demand (credit) A couple of months ago I had shared some random thoughts on the utility of lower interest rates in the current economic environment. I mentioned that "Interest rates are usually function of demand and supply of the money in the monetary system. Demand for money is again impacted by the level of economic activity and outlook in foreseeable future; whereas supply...