Balancing the scale
Industrial recovery is possible next year as the Central bank sees encouraging trends for growth.
Sometimes, inaction is as important as action. The Reserve Bank of India on December 6 kept its basic policy rate – called the repo rate – unchanged at six per cent. Industry and business felt disappointed, saying that the RBI could have cut its repo rate and thus encouraged fresh investment. The repo rate is the interest charged by RBI for loans to banks and banks generally are expected to structure their lending rates in reference to this. The interest rate is important for setting the pace of an economy, since it is this price which determines whether an investment proposal is viable. Why is that so?