Consumer inflation is at the low level of 1.99%. Why is the retail inflation so low? Will it continue to be even less? With this question, sensible people are discussing these issues on a number of serious issues these days. For those who have to save and invest in that money, they have seen such a big difference between the rate of inflation and fixed income products for the first time..
Due to the low inflation, the real rate of return for some deposits has been 6% annually. Raghuram Rajan, who had advocated the real rate of return, is three to four times more than that. It is also possible that the highest real-of-return rate in the world is in India. As far as saving is concerned, this return can end only after blinking the blink. There are many reasons for this. The current rate of inflation is being considered temporary.
Perhaps due to the demonetization and GST, this record has come down to the lower level. Secondly, the interest rates will be fixed according to the inflation rate in the long term. The Reserve Bank is getting much criticism for maintaining high interest rates. It is being said that due to this the economic growth rate remains weak. The possibility of reduction in interest rates has increased. If interest rates are cut, then the borrowers will benefit.
Centers and state governments take more loan. They will benefit significantly from deduction of interest rates. Many companies will also get relief from this. There are also many companies, whose condition has become so poor that even with the reduction of interest rates, there is no hope of being thrown into life. At the same time, there are many companies, which can return new life by cutting interest rates. Although it may be good news for companies and governments, it can have a negative impact on the common people.
Due to the low inflation, I am not denying the benefits of the economy over the long term, but the interest on deposits can be very low. This will hurt the common people who invest a large part of their savings in the small savings scheme. However, a large number of devastation is coming in front of people in the form of an unpolluted house, which is not known by the rate of inflation.
Housing has 21.67% share in the Consumer Price Index. As an average, it may be right, but the nature of the housing costs is such that it seems misleading. Every person wants to buy his own home sometime. At home he spends a large part of his savings. First, he spends a large part of the savings as a down payment and after that he also takes a big loan.
Considering the cost of homes, I think the salaried class spends 40-50% of the loan repayment for 10 years or more. If you add the last saving amount to it, then the cost per session increases. Therefore, the correct picture of 21.67% in the Consumer Price Index does not appear.
Whenever there is news of reduction in interest rates, reduction in EMIs in TVs and newspapers is claimed. It is not wrong, but it has no significance compared to the increase in the prices of homes. Housing loan interest rates have been halved compared to 20 years ago, but in the meantime, there was an increase of five to 10 times the price of the house. The prices of homes have remained steady for some time, but they have not changed.
Due to the demonetization and GST, the black money flow is expected to be lower in the real estate sector. This will not increase the prices of houses for a long time or they may fall. If the dream of low inflation is true, then everyone’s dream of buying a home at reasonable prices will also be fulfilled.
Read Also: Sales of Property Decreased 40%: Propquity