Panch Tattva Wisdom

Given that the Reserve Bank of India (RBI) has set the policy repo rate at 5.50%, and inflation is currently at very low levels, there is scope for the RBI to consider reducing the repo rate further. With extensive social-welfare schemes in place and aged-population is already cared for, lowering interest rates could encourage more savings to be channelled into risk-capital for new ventures and expansion of existing enterprises. Historically, Indian industry has remained relatively backward in terms of capital-market fundraising: many established and well-reputed business houses have chosen to expand predominantly through reinvestment of profits rather than by issuing fresh equity or debt capital for over two decades. A lower interest-rate environment would support growth in key sectors such as tourism, construction and capital-intensive manufacturing, by reducing the cost of borrowing and thereby incentivising investment.