Depends on who you ask.

Retail inflation has dropped to 5.52% in October compared to 6.46% in September and Industrial Production has increased by 2.5% in September but manufacturing growth is still sluggish. Right on cue our most esteemed Finance Minister has called for cuts in interest rates. " I think interest rates now need to be moderated. That is one important factor. Inflation has been helped by both moderation of food prices in India and also global oil price. And I do hope the RBI bears this in mind," he said. He is not alone. Group Chairman of the Mahindra group, Anand Mahindra also called for a rate reduction. The Mahindra group sells SUVs, like the Scorpio, and is heavily into tractors, most of which are bought with bank loans. Car sales declined by 2.55% in October, despite the festivals when sales usually spike, although sales have increased by 3.03% since April. Indeed, there are many reasons to support a cut in interest rate. Global food prices are the lowest in 4 years, the price of crude oil has fallen by over $20 a barrel, growth in China is softening and commodity prices are down. We may expect retail inflation to fall further, so there is a strong argument in favor of lower rates. But economic growth is not solely dependent on interest rate. We have the highest tax rates in the world which increase prices and reduce spending. To reduce taxes the government has to reduce its expenditure, which it is unable to do. Lower commodity prices are helping to reduce subsidies but why are electricity rates increasing when fuel prices are going down? The thinking is that lower interest rate will stimulate growth, which will increase tax collection, which will reduce fiscal deficit, which will reduce inflation and stimulate growth further. It is most interesting that construction companies, whose earnings are dependent on mortgages, are not joining in the chorus for lower rates. That is because circle rates have been increased so high that the real estate sector is in danger of seizing up. Some say that there is no real evidence that low rates stimulate growth. With zero percent interest rates the US and UK are showing signs of growth but Japan and Europe are stagnating. Figures show that Britain is a more prosperous country than Germany but there are those who see scary figures hiding behind the rosy outlook. Instead of arguing about high or low interest rates the RBI could go for neutral real interest rate, which would be neither tight nor loose. A Goldilocks rate, as it were. According to the IMF, that should be 150 basis points higher than retail inflation rate. Which would be around 7.5%. In this high decibel argument who should we believe, the politicians or the Governor of the Reserve Bank, Raghuram Rajan? Poor us.