Should RBI cut interest rates on Apr 5th

Should RBI cut interest rates again? Just imagine if it does, GoI yields will come down too and thus with now a quarterly interest reset of small saving scheme - their rates will fall too.

Is this move by RBI anti middle class ?

 

Government will be reviewing the Small Saving Rates every quarter. Even if RBI does not cut rates on 5th April 2016, my guess is GOI will still cut rates in Small Savings during the next review.

 

The interest rates are linked to G-Sec yields. So are you expecting these to fall in the immediate? Its only then that tge FM can cut rates on these schemes next quarter

 

govt. is pushing rbi to cut rates. i expect rbi will do.

 

So is it an anti-people, pro-reform push is it ?

What's the need of the hour and what does the state of our and global economy dictate?

 

cutting rates will lower the FD income rates of depositors but on the other side it reduces interest liability on loans. so the impact is levelled. it is pro reform act.
lower int rates boosts corporate profitability which will inturn lead to new investments and better tax collection for govt.
need of the hour is definitely rate cut of atleast 0.5%
1% interest rate boost corp profitability by 7%.

 

as expected by govt. focus on rural economy will show results in 1-2 years. only when rural economy picks up india can stabilise its economy.
fortunately India is not largely dependent on global economy as 70% of indian economy is internal consumption.

 

Not sure if impact is levelled. Isn't Credit Deposit ratio at banks is less than 1?

 

But what about the Senior citizens, who depend on interest from Bank FD and Small savings schemes. They cannot work to earn. Their only source of income is the interest from Bank FD, Post schemes and other Small savings schemes. How do they survive? Banks pay them 0.5% more interest than that paid to non senior citizens. But that is not enough. Govt. should create a special category for senior citizens and see that they get more interest from the banks and postal schemes. Not just 0.5% more.

 

Rural Economy will never pick up,Rural India story will keep on going Bad to worse.No recent Govt including present Govt understands problem of Rural India.You can have temporary impact of 7 th Pay Commision in rural and urban consumption and after that in two years situation will be same.So consumption stocks may run for one or two years .

 

Chalo no recent and current government has understood the problems of Rural India. So which Govt did understand? And could you tell us what exactly ails Rural India and factors that will result in it going from bad to worse

 

Government doesn't have money to build warehouses to store agricultural produce. So a large quantity of agricultural produce is destroyed by water and rodents. Government doesn't have money to provide proper transport facilities for transferring agricultural produce. More loss. Corruption. More loss.

The Big Bazzars, Star Bazaars, Reliance Fresh and similar companies claim that they can supply fresh vegetables and fruits grown in their own fields. What they do? They lease agricultural land from poor farmers. Grow Fruits and Vegetables on the leased agricultural land. For bumper production they use chemicals. They get bumper production so that they can sell these products at cheaper (less than market rate) rates in their shops. Soon extensive use of these chemicals kills the land. The land becomes barren and the barren land is returned back to the farmer. The farmer has made used to easy money. He has lost his habit of working hard in the agricultural fields. Further, the land has also become barren. So what will the farmer do now?

In our country, some parts face floods almost every year and some parts face drought almost every year. Both floods as well as drought are damaging economy. State Governments want to control the river water flowing from their state to other state. There should be a policy at National level and all states should follow it. But this is extremely difficult.

Big Companies and Big Towns and Cities need lot of water. This water is literaly stollen from lakes and wells in rural areas. The nearby villagers have to travel long distances for water. The villagers living in the vicinity of the lakes which supply water to Mumbai city and Thane city, in Maharashtra, have to travel long distances for water. Although, they have the first right over the water in the nearby lakes. Similar situation may be existing in rural areas in other states also.

Not only water grid, electric power grid is also required on National level. Theft of power and water by states as well as individuals should be seriously dealt with. In some parts of the country, power is wasted and some parts are in dark owing to power shortage.

 

yes that is a good point. senior citizens fixed income will be affected.
my thinking is that sen.citizens can diversify small portion of their investments into low risk trusted mutual funds. say 15% of savings
.in case of senior citizens if they are farmers they will continue their farming even after age of retirement for others. and if se. cit. were employed they would be in rcpt in govt. pension or or will have enough savings to look after themselves. so there is no need to worry.

 

india is still more than 50% rural. so if rural india goes bad to worse india cannot prosper or grow at expected 7% or even 4%. so govt action in budget towrds rural areas will definitely show some positive change( personally i expect great results of this efforts.) india.
India is the growth story of 21st century. it will not end in 1 or 2 years.every one in world is expecting india to be a great power in next 1 or 2 decades.we cant ignore that completely. an investor is always optimistic. so we are.

 

friend nothing can be made perfect. even american economy is not perfect nor other richer countries. they have their problems and imbalances. america have near to 100% debt to economy.14 trillion $ .japan has 260% debt to economy. India have only 60% DtE. so india in some cases are better than developed economis in the world. america and japan became rich by clear long term planning and our govt is doing the same.
Problems will be there everytime. some may be solved.some may remain and some may get worse.

 

limiting my self to the finance industry, RBI may cut rates but its not going to have an impact. Already RBI has cut rates a lot but we have not seen reduction in lending rates. What is the point of rate cuts when consumers do not get any benefit. Unless the benefits of rate cut are not passed to industry/consumer cutting interest rates is not going to stimulate demand.The govt. reduced interest rates on savings schemes to reduce its interest burden and not because G-Sec rates are going up or down.

 

Good point, water management is a problem. Parts of Maharashtra are suffering from serious drought. The BJP state president rightly said that all IPL matches should be shifted out of the state. 70 lakh litres of water will be saved. I think the IPL tournament in totality should be reduced greatly. This is a serious problem. Same for power. No subsidized power for those who can afford it, even if they are farmers.

 

Can you please explain how cutting interest rates will stimulate demand? If your earnings are reduced (by cutting interest rates), your buying power is reduced and hence demand will be reduced.
If the loan interest is reduced, you can get loans at reduced rates. But does any bank or financial institution offer you loan to buy vegetables, fruits and other daily needs?

 

Do you think that all the successive governments have been ignorant about all this and nothing been done??

Water Grid : have you heard about NRLP? Something that the UPA was not in favour of but very close to the NDA government. So back in focus again in the last 2 years. Budget 15 had an allocation of 100crs for project report. The Project comprises of 30 links to connect 37 rivers across the nation through a network of nearly 3000 storage dams to form a gigantic South Asian Water Grid.

Electricity for all : do i need to elaborate the efforts of the current regime towards rural electrification?

Housing for all : ditto

Toilets for all : ditto

Connectivity : ditto

SHC scheme : ditto

Delisting fruits and vegetables from the Agriculture Produce Marketing Committee (APMC Act).

The list will keep going on. So will stop hoping the point is made.

But hey on your point of the Big Bazaars etc - SHOULD THE GOVT BAN THEM : to protect the interest of our dear farmers?

 

Can you back this up factually