Dear money policy compromises growth

.....The RBI's approach from mid-2010 to keep interest rates high in order to control inflation only set growth expectations back and de-energised the economy. It rested on a simplistic assumption that money supply is all that mattered. By raising interest rates, the liquidity in the system would dry up as borrowers opted out of fund-raising to complete projects. This would also reduce overall demand in the economy, as households would save, attracted by higher interest rates, and reduce consumption expenditures.........

Read - HBL