Keynes and National necessity

TCA Srinivasan- from BS has very good analysis, and further weakens the case for lowering the rate.

The “reduce interest rates” argument is based on the belief that in India is sensitive to the price of money. It forgets that when the first post-1991 investment boom happened during 1993-95, the prime rate was 18 per cent. During the second boom 10 years later, it was over 14 per cent. Today, it is around 10 per cent. So let’s not fool ourselves.

The next point he makes is regarding the fiscical deficiet.

Holy Grail
Then there is the of the fiscal deficit. That it should be as low as possible is not the same thing as saying it should be only as low as is necessary.

I subscribe to the latter view. You can argue about this level but must be a factor in determining it. The can’t be the arbiter, nor can foreigners who lend money to India.

 

 

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