However, if there is a downward shift in the steady state and the natural rate of interest, which reflects long-term growth expectations, shifts down permanently, the stimulative effects of a decline in real interest rates on economic activity will weaken and the effectiveness of monetary policy will be substantially hampered.
What is, however, accepted is that finance did play a role in influencing the growth process in India, although such observations related to financial deepening have little to say about efficiency and productivity growth. The aforesaid observations do not take into account the changing dynamics of the financial system.