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The Reserve Bank of India seems to have raised the CRR rate in somewhat of a haste. Inflation lately has been ruling high because of supply-side concerns.

And the economy has already slowed down a bit as a fallout of the high rates of interest. The automobile industry, the real estate sector, SMEs, and credit card growth have all suffered a setback as a result of the previous rate hikes.

This may also lead to external commercial borrowings going up again, given the difference in the rate of interest at home and overseas.

That would again push up the rupee. And this would affect even more such export-oriented industries as textiles, IT, and so on.

Actually, it appears that the government is more worried about votes rather than the economy, what with Assembly elections to some States approaching.

Paramjeet Singh Mohali

More Stories on : Letters | CRR & Bank Rates

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