Interest Rate – The Most Anti-Socialist Phenomenon

Interest Rate – The Most Anti-Socialist Phenomenon

January 2, 2017 0

Rich getting richer while poor suffers – this is considered a key evil in the society. This is what keeps us from providing equality. But what’s the cause?

The constitution declares India to be a sovereign, socialist, secular, democratic republic. But we have done little to achieve a better socialist society. Socialism here means equal opportunity, equal rights and equal ability to be able to live well, NOT equal pay. It is equal pay based on work done irrespective of all other factors.

If looked closely, socialism would essentially mean that rich shouldn’t be able to get richer just by the virtue of being rich and because we as a society provide equality. However, India, as an economy, suffers from an extremely high interest rate problem. A high interest rate means rich can live out of just being able to lend money and earn more. Money attracts money. It also makes it more difficult for businesses to flourish and makes entrepreneurship more difficult.

One key change I expect to see in the Indian economy in 2017 is a marked reduction in interest rates. Atleast a 2-3% reduction! In itself, this is the most socialist of changes that the country will see, so much for the fact that this will happen in a far right suit-boot government.

Interestingly, lower interest rates would also support a dying real estate sector. Every 1% reduction in interest rate will increase real estate rates by atleast 5% (which will help some balancing for an approximate 40% reduction in prices expected due to demonetization).

So, better real estate, increased entrepreneurship, lower inflation. What more can you ask for? Drop in your thoughts in the comment box below.

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