I think the interest rates should be lowered from the current level. India has the highest lending rates and borrowings to Small and Medium Enterprises (SMEs) are very less and is also a laborious process. Lowering of the interest rates is a must if we are to sustain 9.0 percent economic growth.
RBI's main concern to rein in the inflation rate has been achieved with the rate of inflation declining to 3.23 percent at present. This comes after it had raised interest rates five times since mid-2006, most recently in March.
However what surprised me most was the tension brewing between the RBI and the Finance Ministry.
The RBI’s rationale for its policy has been that the economy has been growing at an unsustainable rate, which carries the risk of rising inflation.
But recently Mr P Chidambaram has asked banks to ignore these signals and not raise their lending rates in order to avoid disrupting the growth momentum.
I think he is right in his observation that banks need to find ways of lowering their cost of funds so that lending rates can be kept down.
The fact of the matter is that – is it right for both the Finance Ministry and the RBI to send conflicting signals to the banks? I think they should make a concerted effort to resolve the issue. All I believe is that India's robust growth has to be sustained; we can by no means check economic growth fearing rise in the inflation rate.
We need to understand that although the decline in bank credit has helped the RBI manage liquidity, it has also impacted the industrial output adversely.
The hardening of interest rates over the last one and half years was squeezing the profit margins of all enterprises. Add to that the appreciating rupee. I fear that (SMEs) will have to close shop if no relief is provided.
I strongly believe that reducing interest rates would go a long way in reducing the operating costs of exporting SMEs that have been of late facing a decline in profit margins.
Today inflation rate is far below the lower limit of RBI's tolerance levels of 4-4.5 percent. I think RBI should take this point into account when they review the monetary policy at the end of this month.
The enactment of Nanci Pelosi's first hundred hours has begun, and house democrats are searching for ways to fulfill her goal of lowering the price of prescription medication for seniors using Medicare. Next week democrats will try to use huge purchasing power of the millions of people currently enrolled in Medicare to drive a better bargain with pharmaceutical companies. According to the Houston Chronicle, ?This is not something that will require a rocket scientist to address," said Dingell, chairman of the House Energy and Commerce Committee. He said he did not expect the HHS secretary to negotiate the prices of all medicine used by seniors, but to prioritize efforts on those drugs that are most important.? The bill that will potentially lower the cost of healthcare for seniors will be coming up to vote Friday. The bill is expected to pass through the house with ease due to the recently acquired majority. If passed through the house, the bill will still have a rough time in the Senate. Assuming all democrats vote for it, 9 Republicans would have to cross over and vote for the bill in order for it to receive the 60 votes necessary for the bill to be taken to a public vote. The Houston Chronicle states, ?Under the current program, seniors enroll in private plans administered by insurers. They usually pay a monthly premium and pay for a portion of their medicine. The federal government also subsidizes the coverage, with extra help going for coverage provided the poor. The plans themselves determine which medicines they will cover and how much they will pay.?
"What seniors want to know is that they're saving money, that they have choice, and that they have convenience," Merritt said. "If direct negotiation can do all that, then it's a different story, but there's a burden of proof, a hurdle they have to jump in showing that's the case."
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