The level of interest rates...

Article;
How a 50-bps plus rate hike by RBI will add to debt-load of BSE-500-firms.

Comment;

What decides the level of interest rate is also important... It is the level of unemployment and inflation that are responsible for it because the central bank manages interest rate to affect these two variables. In INDIA's case it is inflation and little unemployment. Inflation exerts an upward pressure on the interest rates and unemployment downward...  So during high inflation regime like in INDIA we expect interest rate to rise but we do not have updated data on unemployment which also have an effect on the interest rates. More mathematically if the inflation-target in INDIA in 5% and the actual inflation is 10% we need to increase interest rate by 500 basis points according to Taylor’s Rule. Therefore, if the current repo-rate is 8% then the central bank should increase the repo rate to 13 %. When the central bank increases interest rate it indirectly restricts income and demand and consequently prices… Moreover when interest rate is hiked it affects savings of all, poor and rich alike, capitalist and the public, consumers and producers… So consumers have majority. Producers’ majority would demand lower interest rate and consumers higher interest rate for their savings. Producers are also consumers…Therefore, the (RBI) Governor should decide in favor of majority and a falling rate of growth of deposits due to negative real interest rates (nominal interest rates minus inflation)…