On one Hand Manmohan Singh is talking about All Inclusive Growth… and on the other hand he is allowing RBI to make rich super-rich… and poor super poor.
Big industry and now government can seek international finance a token interest rate of 5% This economical finance is available to only the industrial giants who can reinvest the money and grow… While common man like u and me, small businessmen/traders need to pay 13-14% to get the same kind of finance… worse still since elite Indian Banks do not cater to the masses.. a lot of us end up taking personal loans at 2-3% pm.
There is a risk of currency exchange rate fluctuations.. but since Indian currency is appreciating, and you are getting finance at 1/3 the cost… I think those who are eligible will not mind taking that risk. This unfair advantage will allow the giant to continue to grow and throw small merchants out of business… Something I seriously oppose…
The EMI rates have risen so high that many people will end up defaulting…. (banks will go under… already most of US banks are under threat due to sub-prime lending… Indian banks will follow them to an abyss.) the demand for property will go down creating the prices to spiral down. this will first cause the reality and real estate companies to go under. then soon the heat will be felt by cement and steel sectors.
Those who do not default on the loans they had taken, will see that after paying double the agreed amount of interest, they have nothing to spare… so the consumerism will actually go down…. hence cooling the entire economy….
The boom in Indian economy is due to consumerism… and not exports…. Everybody knows that, but who will tell the government?
So overall we will go back from BOOM ERA to the HINDU GROWTH RATE ERA… where we had high inflation, negligible growth and all the ills associated with stagnation.
PS: I’d write more, but I have to go earn money for the government to flush down the toilet.
2 replies on “Interest rate screw up”
Property rates are too high. Don’t you think it is better if property rates cool down a bit.There was a news item yesterday saying that Railways are getting International finance at a lower rate than Reliance. Lalu beat Reliance in this.
yes.. Ministry of railways is able to get international finance at 5% … while while individuals get at 14-15%
and this is what I am pointing at…. the rich can get cheaper finance and get richer…. while poor will see their entire savings washed away paying EMI.
Regarding property rates… yes its too high… but look at the bright side…. it has caused a spur in construction and industry… a lot of people are making their living by renting out property….
the best way to cool off property rates is to implement land reforms… and hence increase the supply… not by punishing those who buy property.