Interest Rates and Equity Markets

The Budget for 2003-04 expects that the softening of interest rates will continue. However, the analysis here suggests while demand for funds both from a revival of normal economic activities and from the government is likely to rise, the supply of liquidity in the system is likely to be much lower than in the past 12 months. As for the equity markets, it is unrealistic to expect the markets to be pepped up through fiscal incentives or other palliatives without an overall economic policy framework which encourages new investments and a regulatory mechanism capable of sustaining investor confidence.