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Nov 2014
Economic recovery in India still uneven . Key interest rates have persisted far too long . We must admit that RBI interventions on checking money supply as a tool to rein in inflation have elevated the borrowing costs and the global economic stasis, is impacting trade and input costs. It is true that the fiscal picture is getting to be incrementally better but the on going monetary policy has apparently lost traction.The conservatism of RBI to key rates was no different when food inflation was at 16 % to the current 5% plus .The government on its part, must put its house in order . Cosmetic and marginal reduction in fuel prices is fringe decoration Though the government is desirous of an upward GDP targeting, it is yet to marry divergent requirements, both Monetary and Fiscal , to spell out a road map tying policy to specific goals.Perhaps its attentions are more on bolstering the political environment and less on the economic one.
Operating on a different frequency , the RBI too seems obsessed with external economic ambience and rupee / dollar value .Our IIP has remained below potential for long .Banks have the money, but lower rates would help lubricate the gears of transmission of this idle liquidity to assist growth.There is strong case for easing the rates for the larger goal of boosting our under utilised manufacturing sector .Clearly a " Forward guidance " on monetary policy by the RBI is overdue
Nov 2014
Economic recovery in India still uneven . Key interest rates have persisted far too long . We must admit that RBI interventions on checking money supply as a tool to rein in inflation have elevated the borrowing costs and the global economic stasis, is impacting trade and input costs. It is true that the fiscal picture is getting to be incrementally better but the on going monetary policy has apparently lost traction.The conservatism of RBI to key rates was no different when food inflation was at 16 % to the current 5% plus .The government on its part, must put its house in order . Cosmetic and marginal reduction in fuel prices is fringe decoration Though the government is desirous of an upward GDP targeting, it is yet to marry divergent requirements, both Monetary and Fiscal , to spell out a road map tying policy to specific goals.Perhaps its attentions are more on bolstering the political environment and less on the economic one.
Operating on a different frequency , the RBI too seems obsessed with external economic ambience and rupee / dollar value .Our IIP has remained below potential for long .Banks have the money, but lower rates would help lubricate the gears of transmission of this idle liquidity to assist growth.There is strong case for easing the rates for the larger goal of boosting our under utilised manufacturing sector .Clearly a " Forward guidance " on monetary policy by the RBI is overdue
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