Economics in India - An argument to increase the interest rates

An argument to retain the interest rates as it is or make it higher ( in the short term)

 Today there is an argument to reduce the interest rates so that we can get over the recession. But if we reduce the interest rates we will fall into a bigger recession later on in say 5 years time as against a mini recession in about 6 months time. If we increase the interest rates now there is a possibility of having a micro recession in about 3 months.

Thus between the choice of having a mini recession , micro recession and a full fledged depression. We should opt for a micro recession or a mini recession in the near term rather than have a depression in the long term say 4 to 5 years from now.

The premise that we are looking at is that an increase in interest rates will make the businesses to re-look the unproductive investments now and reduce the pains of a depression. This in essence is the logic that is proposed by the Austrian Business cycle theory.

Effect of increasing the interest rates : It takes away excess cash from the hands of the businesses and makes cash availability little more difficult.

Effect of decreasing the interest rates : It makes excess cash available in the hands of the businesses and makes cash a little cheap meaning availability is a little easier.