Mehraj Dube

Mehraj Dube wrote a post :

Mehraj Dube

There has been too much talk around interest rates. Every
other business leader has spoken about it and every other news organization has
given more than enough time discussing and expecting an action by The Reserve
Bank. RBI action to most has meant only one thing – a rate cut. Most
commentators have helped us believe as if not cutting interest rates means no
action. RBI on the other hand has taken the interest rates too high to believe
it can really impact inflation.

Low interest rates have always boosted credit and in return
have helped businesses improve their profitability but rates are not all that
have made them successful. So while policy is a bit skewed towards settling
inflation more than tackling growth, why blame interest rates alone for bad
business scenario in India right now?

 On Money Mantra Uma
Shashikant disagreed and explained that there was no lack of entrepreneurial
drive and skill in India and that lack of capital was the single largest force
holding Indian businesses.

Rameshkumar, a banker and an SME expert from CII also
supported the view saying high interest rates could jeopardize small and medium
enterprises and this is a big reason why manufacturing is not picking up in
India the way it is expected. However Ashok Agrawal of Mint Strategy Advisors
is asking another question. Is there a guarantee that an affordable loan is
also an accessible loan? Most banks would rather double check the future of a
business in India in the given scenario before they disburse cash. From Greece
to GAAR everything seems to be posing a business risk. He is also asking if
Indian businesses are working enough to innovate and to sell better than before.
Fitch Ratings Director Devendra Pant wonders if RBI’s high interest rates have
helped the inflation problem enough, though he likes to highlight that food
inflation was what keeping the headline inflation high and so more reasonable
level of non-food prices should not only inspire RBI to rationalize key rates
but could help factories too to show some results.

I think just as recession in early 20th century
created Marketing as a science and made products like Denim a worldwide
phenomenon, a credit crunch will sure shoot some business surprise this time as
well. This could mean a lot of heart burn, a failure or two, but if business
leaders spent more time knowing their market and targeting it better, interest
rates here or higher can only remain a concern not a crisis.

A subvention scheme for a home loan buyer, a cost cutting
initiative for an airline owner or more rewarding return on a senior citizen’s
deposit, an interest rate can inspire a thousand new ideas.

(Mehraj Dube is an Associate Editor with NDTV,
his show Money Mantra is aired Mon to Fri 6 pm on NDTV Profit. You can write to
him at or join him at
7 years ago

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