Interest Rate hike by the RBI is certainly a political move to tend the inflation.but simultaneously it will negative impact on the ruling congress party because millions of people had taken housing loan at floating rate of interest at around 8% and now it is 13.75% which seems very unusual. Mr Chidambaram & Entire congress party is responsible for this myth. they have to take intelligent action to save the house of a middleman or else situation will become be the worsten in the coming days
This is the time to try lalu as FM. He has done bery great job as rail minister. I thik he is the person Who can make comman men life easy. PC doesn't know any thing except increesing tax and intrest
RE:Lalu Should be FM.
by G S on Apr 07, 2007 04:11 PM Permalink
what are you saying increasing the coaches for tatkal scheme where you are paying 150 Rs extra on your 300 Rs ticket menas straight forward 50% premium for reservation. Its a indirect burden on the individual.same way increase reservation period from 60 days to 90 days again increase the waitlist which will impact in increase in tatkal reservation
No, the increase in rate by RBI is creating bad atmosphere and people, particularly middle and lower income group has to take more burden and they may become helpless to live in this highly competitive and high rise of essential commodities in India. We all are telling that ours is a developing country and are asking foreign investors to invest in India for industrial development, but the weak and destructive point is that in the name of industrial development, we are becoming more and more dependent on essential commodities on foreign countries. There are less quantity of agricultural products which are essential for the daily lives of crores of Indian public and shortage of foods will be a reality in the near future in India. With regards to the invesement, we are not against investements for developmental works, but we should first concentrage for self development in agricultural areas instead of constructing by taking huge agricultural and fertile lands for chemical / other IT industries which are of no use (yes, present terms it can be a job maker for educated youth, but on long term, it will be a curse on Indian people) since we are not concentrating our energy on agricultural developements. Iam of the opinion that if we are concentrating on collecting tax and but by decreasing the tax rates on common / poor man, increasing the tax rates on rich cateogry. Also, all types of tax exemption has to be withdrawn because these exemptions are being used for evading tax payments due to Govt of State and Central. Tax structure, but should be re-structered entirely. There should be limits to acquire buildings / flats for a family, individual since it is the3 main reason for increased cost of flats/houses. We in India, all are in the habit of acquiring large sum of money and changing it from white money to black money. Black money is the curse of development of India and we should control it immediately by taking sudden dose for withdrawing Rs. 1000 and 500 notes within a two weeks time. Unaccounted money has to be taken back from all parts of life and we should seriously think about how to control this black money which are mainly occuring due to the massive corruptions in all types of life. Farm houses to be taxed since it is the new centre of attraction of black money producers / keepers and there should be proper taxing method in agriculture sector as well.
RE:NO, RBI INSTEAD TRYING TO GET OUT OF INDIAN BLACK MONEY BY WITHDRAWING RS. 1000 AND 500 NOTES
by G S on Apr 07, 2007 04:12 PM Permalink
totally agree with you. Mr Reddy & Mr Chidambaram to be replaced
This will only fuel further inflation for the reason (10 when credit becomes dearer, production comes down (2) When rupee strengthens it affects exports (c)As we are a POL importing nation and as the fule prices are raising every day, our fex reserve will come down (4) Cosequently when production falls, it will have effect on employment, rise in prices. Solution lies in finding out ways and means of increasing supply
RE:RBI steps to increase interest rates
by Rohit on Apr 08, 2007 05:51 AM Permalink
You have presented the strangest Economics Theories I have ever seen.
The build up of forex reserves creates inflationary pressure. India wants to reduce her massive forex reserves by appreciating the Rupee. When the Rupee appreciates it lowers the price of imports like oil and food. It also reduces exports and therefore reduces Aggregate Demand. Together this lowers inflationary pressures.
More importantly when interest rates appreciate people do not borrow as much to invest or to buy a car/house. This lowers aggregate demand which lowers prices.
Tis called Intro to Macroeconomics.
PLEASE read an Economics textbook and educate yourself. Most of my first yr college students can handle Samuelson and Nordhaus.
RE:RE:RBI steps to increase interest rates
by Balaji Viswanathan on Apr 10, 2007 07:18 AM Permalink
One sane post from whole bunch of trash here. RBI is trying to contain inflation from two angles - raise interest rates and allow rupee to appreciate.
India is flooded with foreign money and to mop out that much dollars, RBI introduces hundreds of billions of rupees every year into the market and this is one of the fundamental reasons for inflation. Now, by restricting the amount of dollars it buys, it is directly causing rupee to appreciate and counters the core inflation by reducing rupee supply. Indirectly, this will also reduce the import cost of oil & other materials contributing to a reduction in inflation.
Regarding interest rates, we are seeing a runaway growth in credit. Credit are of three types - loan for growth & investment (house, starting a company, etc), loan for depreciating assets (car) and loan for expenditures (electronics, grocery etc). Only, the first category of credit is healthy and the other two must be discouraged, while the third one should be totally avoided, ideally. We are having a spurt in personal loans indicating the latter two, and this habit has to be curbed. And our domestic industries like auto wont be hurt too much, as they can export anyway given a huge price advantage.
From the government perspective, the interest rates will hurt it most (it benefits from cheap loans and high inflation, being the biggest borrower) and high interest rates will discourage borrowing and bring more fiscal discipline.
For the corporates, the hike wont impact too much, as the big ones can easily access the vast bottomless pit of global liquidity from Japan and London at 1-5% rates. For smaller ones the hike will pinch, but will encourage greater savings and better efficiency. But, the government should do some sector specific sops to protect small enterprises and startups from super-high interest rates.
Overall, this short term interest pinch, will pull back the nation towards greater saving & investing, and curb unhealthy personal loans along with cooling the real-estate industry by restricting housing loans.
So, an interest rate hike is a long due, and will help in cooling the structural overheating that is showing in the form of fissures called inflation.
Please ask PC the honourable FM that can he pay our home Loan which they gave us a conspiracy with that in future we will increase the rates whatever they want ...
RE:
by Rohit on Apr 08, 2007 06:12 AM Permalink
Did you have trouble understanding the meaning of VARIABLE RATE MORTGAGE? Did you not realize that 'variable' means it can go down and up?
Please sue your Std II English teacher for his failure to teach you elementary English.
RE:Our pundits at the North Block are scared.
by G S on Apr 07, 2007 04:16 PM Permalink
Inflation can be control when you able to control pulses prices not the interest rate.I thought we are now going in a wrong direction. Economy is doing well but bcoz of this politicians it may take "U" turn very soon. Like sugar sector,cement sector,banking sector,real estate sector,automobile sector, list is very long those will effected from this rate hike.
By increase the bank interest rate, the purchasing power of Aam Adami has reduced.I read in one Article that the total Bank Credit is around Rs.175000 crore. out of the above amount only 23000 crores were lend to company listed in stock exchange and remaining were lend to small enterprises and personal loan. this means the additional burden on the small sector and Aam Admi which results is reduction of purchasing power. which means 1% increase in interest rate reduction in purchasing power by 1750 crores and recently the interest rate have gone up by 3-4 % which means reduction in purchasing power by Rs.5250-7000 crores. this will lead to reduction in purchsing of industrial goods and less revenue collection by the govt. and less employment generation.
The system should be such that the lower segment of loan should be given at a lesser rate and higher segment loan should be given at a higher rate of interest. like loan upto 10 lakhs should be given at 2% and from 11-25 lakhs should be given at 5% and from Rs.25-50 lakhs at a 7% and so on. since the big industry can earn the profit due to technological advancetage and the capital employed turnover is more than the small sector. and also the cost of the procurement of raw material etc. are also less which means the cost control can be done by the large industries. if the large industries can not afford to higher interest then they should not be allowed to function.At least in small industries, the employment generation will be more and more and more people will come forward to set up the industries due to low rate of interest.
like wise the tax structure should be designed where the low capital industries should be given more deduction and more tax to big industries. since the big industries can afford to pay more tax on their income.
Now a days, the big industries are earning 2000% some even more why they should be allowed to earn that much.it means their cost is very less and they are taking the advantage of consumers.
their should be a monitoring authority who should monitor the profit of the big industries and in no case they should be allowed to earn more than 100%.
By increasing the interest on bank loan, the hidden agenda of the government becomes visible where the all small industries will be closed due to competition from the big industries and no person will have time to protest due to such a high cost of essential items. if they protest than they will not able to earn money to feed themself for that day. for every day food they will have to work every day other wise to starve.
Let me share with you the good part. Even friends, I expect that there should be further increase in the rates by RBI, yes to give some advanatage to the middle class people to purchase real estate for self residence in Metros like Delhi.
Speaking perticularly about Delhi, where the builders have manipulated such sky high prices without any base that it is really inbearable to a small middle class person to own a house.
Govt. has not done anything in this segment and that is why congress is losing this time. In fact BJP if also not takes lesson from their failur, then take it from me, they are going to lose this time.
But this is also fact that who so ever comes, no body looks into aam admi's needs.
So I feel, it a Bhagwan ki maar (in disguise), jiski koi awaj nahin hoti,
Even I prey to God that there should be further increase in the interest rate by RBI.
I understand that the common people again going to suffer because of some other impacts, but the need of the hour is correction in the real estate prices.
my question to all the intelligent people is i have taken a home loan in 2004 at 8% fixed, and that time bank repo rate was lower than now and inflation was under control and y suddenly interest rates have gone up? my question is if interest rates were less during 2004 and inflation was under control y then RBI has increased Repo rates? can any one who know better answer my question? You can also mail me at sheela709@rediffmail.com
RE:Inflation?
by Venkateswaran Natarajan on Apr 07, 2007 04:24 PM Permalink
The fact of the matter is "The government does not know how to rein in inflation" rather than burdening the common man with rate hikes. The most ideal solution would be to try and increase the supply of housing projects. That way the demand supply gap will be lessened and the rates will go lower. The government is instead punishing the common man who has bought a house to live and not as an investment. For the businessman he is going to pass on the rate hikes to the consumers. So the persons getting affected are common middle class people. Further even Fixed loans are not entirely fixed, there is a clause whereby the banks can increase the EMI or Tenure of the loan. This clause is inserted typically to protect the bank's interests.
RE:Inflation?
by G S on Apr 07, 2007 04:19 PM Permalink
you are lucky one who bought your house with fixed rate of interest but 90% of total housing loans are floating it means that additional burden of 25% in EMI due to this rate hike
RE:Inflation?
by Shanker Shetty on Apr 07, 2007 04:02 PM Permalink
hi, sheela, this is primarily because real estate prices have gone skyrocketed and real estate prices have become alsomost double since the last one and half year. govt just want to control the real estate prices..which is not the correct way.. any queriess write to me at shan_shet@rediffmail.com
you can also call up PC and ask him and fire the hell out of him ...check the telephone directory and there you wll have the conact number.
RE:Inflation?
by sheela sharma on Apr 07, 2007 04:35 PM Permalink
Mr.Shetty, i know that, to control real estate prices you have to control bring real estate regulation act or similar to that of IRDA,TRAI, etc., by hiking the rates it will affect common borrowers and middle class,higher middle class if they have money they wont take home loan!
Aam aadmi only want to know is: whether he will be able to pay the loan amount as per agreed terms on the date of signing the contract with Bank. Otherwise there is no need of such highly qualified international people at the top but Laloo is fine.
