The latest announcement by the government regarding interest rates will surely have some impact on the Indian economy.
Recently significant changes in interest rates have been announced by the government, which will impact various sectors of the economy.
Let’s check out the details of the announcement and what the potential impact of the same is.
News regarding RBI monetary policy
Recently, the latest monetary policy is announced by the RBI (Reserve Bank of India). The repo rate is unchanged and is still 4%, along with a reverse repo rate of 3.35%.
The market participants and analysts properly analyzed the decision to keep the rates the same.
Reserve Bank of India has also announced the measure to support the economy because of the ongoing COVID pandemic. This will include $6.8 billion (Rs. 50,000 crores) on tap liquidity window by the banks supporting healthcare.
They also hold a special liquidity of $2.2 billion (Rs. 16,000 crores) for the contact-intensive sectors. And to support small financial sectors, they are holding an amount of $1.4 billion (Rs. 10,000 crores).
In the statement, they also gave an estimate of economic growth of 9.5% in the ongoing fiscal year.
The central bank has also revealed that inflation has remained in its target range of 2 – 6%, and inflation is expected to remain in the same range in the coming months.
The government has made a big announcement regarding interest rate
Recently the government has made a big announcement regarding the interest rate. As per the announcement, the interest rate may vary from the ongoing interest rate.
It is going to impact loans, investments, and mortgages. So, individuals need to check out their financial plans and make any required adjustments.
If required, do not hesitate to take advice from financial experts and ensure you make the right decision.
The government announces a reduction in interest rates, which can be a move aiming at boosting economic growth.
The reserve bank of India has also cut the repo rate by 25 basis points, i.e., 5.75%, the lowest since 2010.
This decision was taken because of the present economic situation, which was experiencing slow growth.
This action is expecting a stimulus in the economy and will also reduce the cost of borrowing for consumers and businesses.
The reduced interest rate is also expected to benefit the manufacturing sector and will also result in a reduction in the cost of taking money for the business.
Further, it will increase expansion and investment by the companies, which can also result in job creation, thus increasing the economy of India.
On the other hand, a reduction in interest rates may result in the currency’s depreciation, as investors can shift their investment to other countries offering high-interest rates.
It is expected that this can impact imports more expensive and can also affect the balance of trade.
Advantages and disadvantages of the big announcement
This major announcement in the financial sector of India has both advantages and disadvantages. Here are some of them.
- With high-interest rates, people can save money and earn more interest on their savings accounts.
- People will spend more because of the low-interest rate, which in turn results in boosting the economy.
- People can avail of more car loans and mortgages with lower interest rates.
- Lower interest rates will also help to boost economic growth simply by encouraging investment and borrowing.
- With low-interest rates, savers will be most impacted as they earn less interest in their savings accounts.
- Currency value will decrease with low-interest rates, which can result in expensive imports.
- The low-interest rates can also result in inflation because people will have more money to spend, and the demand for goods and services will increase.
The announcement of reduced interest rates is a significant development likely to have a higher impact on the Indian economy.
However, this bold move is expected to boost the economy but will also have some negative impacts.
On the other hand, it will be interesting to see how different sectors of the economy will be impacted in the coming days.
But the best thing is that it will help people earn great returns on their savings and enjoy low-rate loans.