.........And when the current account deficit (CAD) was looking problematic, Subbarao even gave a speech at the London School of Economics’ IG Patel lecture in March arguing that those advocating interest rate hikes to fix the CAD were wrong since lower interest rates would actually encourage equity investors even while dissuading investors in debt. That is clearly a view the Governor jettisoned very soon. It is never possible to answer a debate in the absence of counterfactuals—would lower interest rates have spurred investments while various government clearances continued to dog them?................
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