InvestorQ : Why are interest rates falling since the Modi government has been in power?
Rohan Bhadani made post

Why are interest rates falling since the Modi government has been in power?

Swapnil Sarang answered.
2 months ago
Well, this could be another controversial topic, and some might see it differently from others. The fact that interest rates have fallen below 5% from the maximum of 9% in the Modi government’s political period will give rise to many questions. If you look at the condition of the Indian economy now, it is the worst ever since, and it appears like we went ten years back in terms of economic growth.

There are several reasons for such lower interest rates, and of them is expenditure made on economic development, infrastructure, and some other allocations that abruptly imbalanced the economy’s state. That could also be due to a poor budget allocation and poorly planned expenditure on stuff that does not elevate economic growth.

And now, this pandemic. We were already dealing with some decisions which were enough to stoop down the interest rates, and with that, a pandemic hit. The Indian economic growth was contracted by about 29% in the first wave. Soon after, things were starting to normalize we get another wave of the coronavirus (covid-19). As it turns out, the Indian government was not ready for it with its big plans to help the other countries. 

While the Indian economy was on a fragile recovery, it got hit by another wave of this pandemic, which made things worst. So, in recent action, the Indian government has slashed interest rates on saving schemes like PPF, KVP, and other small saving schemes. It has been done to boost the economy, and we could clearly be able to see the impact as we are hoping to hear about some relief packages from the government. Therefore, reduction in interest rates is compensatory in nature to boost economic growth.