The most of the Indian newspapers went gaga on September 30, 2015 over India’s Central Bank –Reserve Bank of India (RBI) cutting
the benchmark repurchase rate by 50 basis point to four and half year low of
6.75 per cent? The Repo rate is the rate
at which the RBI lends money to commercial banks. The Times of India, India’s
largest circulated daily came out James-Bond style headline quoting the RBI
Governor “MY NAME IS RAGHURAM RAJAN AND I DO WHAT I DO”. Compare
this with a business daily which said “Raghuram Rajan Does” while another
screamed “Rajan goes for big-bang cut”. Many others tried to be as
dramatic as possible.
So what is the significance of these
positive jibes to people at large? Why so much is made out of RBI’s
decision to cut the benchmark repurchase rate? Has the best time (Ache
Din) really arrived for India and the country is all poised to
leap-frog? Is India going to over-take China not on population but on the
business and economy fronts? Is 21 century going to be India’s as made out to
be although 15 precious years are already lost?
But all experts seem to send the
common message. The year-end bonus or
the corporate gift which most of the Indians are looking forward to in the
coming festive season must now be spent
(in case they get one) on overpriced
white goods (even if prices get reduced as a token of gesture to Mr Rajan), new
two-wheelers, cars and what not. Better still if they can invest in one of the
highly priced mediocre apartments since the borrowing cost has reduced
“substantially”. Never mind if some of these apartments are costlier than
in Singapore or in Dubai or quality is the last thing the buyers get. The
customers must take in stride the over-promises the builders make on
amenities like water, roads, electricity and connectivity.
The message is be sympathetic to the
real estate players who have shown remarkable resilience by "holding
on" though inventories piled up in last two or three years. Indian builders
and real estate agents are lucky that RBI has now come to their rescue. As a
consequence, the general people must now
be prepared to get smses, emails and social media messages that would urge them
to spend their life-time savings for a better life (of builders). It is
really now up to all aspiring citizens, the home seekers in particular, to
bail-out industrialists, travel agents, builders and others struggling to sell
their products despite all the marketing gimmicks!
All said and done, there is little
doubt that the rate-cut is welcome but can help the economy only to an extent
and the rest depends on many other factors including the global situation. The
real challenge for the common man is not to fall prey to all these exaggerated
predictions of boom times ahead. But will he or she see through the maddening
headlines?
Views expressed are personal.
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