A recent press report said that the Reserve Bank of India, the central banking institution has planning to do a revised study on the potential growth rate. Dr D. Subbarao central bank Governor, told the press that the study has been planned due to the slowing economic growth.
Reports said that the issue has been highlighted by the fact that the increase in the Index of Industrial Production by 5.7 per cent in April-May 2011 was lower than the 10.8 per cent in the corresponding period of last year.
Dr. Subbarao added saying that the high interest rates may sacrifice India’s growth in the short term, but is essential to secure long-term growth.
The RBI has recently been hiking the repo and reverse repo rate to control inflation. Repo rate is the rate at which banks borrow money from RBI and reverse repo is the rate at which RBI borrows money from the bank. The hike in base rates has made banks to charge higher interest rate for loans and also provide high rates on deposits. Most of the banks have hiked their lending rates which have made retail loans such as home loans, personal loans, gold loan, car loans etc. costlier to the borrowers.