What are negative real rates? Suppose you earn 4 per cent per annum on your savings in the bank. The inflation in the economy is 6 per cent. What value add has actually happened to your savings? You guessed it right. The value has eroded by 2 per cent. This is what a negative real rate is.
The nominal interest rate, or the RBI policy rate, is at multi-year low of 4 per cent (even lower due to excessive liquidity). The inflation is inching