The downward rigidity of Indian interest rates

This paper tries to assess why lowering interest rates is proving to be hard in India. It
singles out the role of three factors: (i) high public debt and the structure of this debt, (ii)
the overhang of non-performing assets; and (iii) the policy being pursued with respect to
accumulation of foreign exchange reserves. These three factors are causally linked to
each other and should not be looked upon as mutually exclusive contributors.