07 OCT,2019 | MEDC
The RBI’s decision to lower the repo rate for the fifth time in a row signals that it is doing all it can to revive the economy, but that may not be enough. The ball in now in the court of the government, as key fiscal issues are rising to the forefront. On the monetary side, there is clearly an issue with the transmission mechanism as the policy rate has been reduced by 110 basis points cumulatively over February-August, but the weighted average lending rate of commercial banks has declined by only 29 basis points. Banks are saddled with NPAs, and India’s corporate debt market has not taken off to the extent desired. The RBI is doing all it can to promote growth but until these systemic issues are addressed, the economy will not operate at its optimal potential. The revival of growth has to be a priority of the government, and, to that end, suitably designed public-private partnerships need to be revived.
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