Also, while in general the rates of interest have come down, they are available more to highly rated borrowers than to the small and medium enterprises. There is considerable concern about the inadequate flow of resources to rural areas, and in particular agriculture, while interest rates have not been reduced to the extent they were, for the corporate sector.
Fiscal policy and financial sector There are several channels that link the fiscal and financial sectors and in the Indian context four of them appear significant. These relate to (a) governments’ borrowing programme; (b) guarantees extended by governments; (c) mechanisms such as ‘direct debits’; and (d) governments’ investments in financial sector.