Effectiveness of interest rates limited when fiscal position stressed
It is a challenging time for the Indian economy amid the near-consensus for embracing a “painful process” of fiscal consolidation. Aggregate demand remains stultified (capital investments are projected to hit a five-year low this fiscal year) helping ease headline inflation to below 7% after a three-year gap and reinforcing the case for growth-oriented policies. Downside risks for the global economy may have receded a bit, but have barely vanished and there is the renewed threat of currency war among countries desperately wanting to get their economies back on course. Former RBI Governor and 14th Finance Commission chairman YV Reddy, recipient of this year’s FE Best Banks Lifetime Achievement Award, discusses the state of the Indian economy ...........
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