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Saturday, August 19, 2006

We have come a long way...

Not so long ago, the RBI and the government were cutting rates. And they were met with vociferous opposition. The opposition, the Left parties, trade unions and even sections within the ruling parties opposed the move. What about the common man who is a saver it was asked, what about retirees who depend almost exclusively on interest income was asked, the actions are purely meant to benefit the corporates and big businesses it was alleged.

The change from those days to today, could'nt have been more stark. Now, we are currently in the midst of rising interest rates and voila, the government is now being pressured to 'not' raise rates. Because the rising rates have hurt the 'common man' as his EMIs on loan's increase. The criticism has come from within the ruling party and apparently was so strong what government had to send advisories to PSU banks on getting board approvals for rate increases (rather than just routine decisions). Aside with this, there has been no welcome/praise for rate increases on the deposit side nor has there been no pressure to revise upwards rates on Post office savings schemes.

This is just an indication of how much water has flown under over the past 3-4 years and how we are moving from a saving oriented society to a 'relatively' more consumption driven. The definition of 'common man' earlier was that of a person who worked all his life, saved money - put that in FDs or Post office schemes, spent only when he had money etc etc. The 'common man' currently is someone who has a housing loan, a car loan, a personal loan, someone who goes to Big Bazaar's or Shopper Stop's of the world every other weekend etc etc etc.

And this is no cyclical change in response to lower interest rates or robust economic growth (read: higher salaries and higher employment) - its a structural change and one that has still got a long way to play itself out to full extent.

That's it for now....

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