CAN'T LIVE IN ISOLATION
The RBI in its policy statement on June 18, 2012 indicated clearly that factors other than high interest rates are contributing to GDP slowdown. As part of the policy document the guidance clearly states that evolving growth inflation dynamics would continue to influence future stance. This should be read as follow up to what the RBI said in its last policy on April "The reduction in the repo rate is based on an assessment of growth having slowed below its post-crisis trend rate which, in turn, is contributing to a moderation in core inflation. However, it must be emphasised that the deviation of growth from its trend is modest. At the same time, upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates". In the current ever worsening domestic macro environment and turbulent global economy can the RBI afford to act in such a way. ? Consider the last 3 economic statistics i.e WPI, Industrial Production and Q4 Gross Domestic Product it seems growth has moderated significantly with the threat of a general economic slowdown looming large. Not to forget joblessness rising consistently. To squarely put the blame for the current crisis on fiscal policy is uncalled for, rather there is a need for a co-ordinated approach to tackle the current threats.
NEED TO BE PRO-ACTIVE
Looking back at the 2008-09 global financial crisis one can't help but wonder the speed and intensity with which RBI had cut rates to ensure an easy monetary policy environment.
One wonders why such a loose monetary regime cant be implemented to jump start the economy.
The RBI in its policy statement on June 18, 2012 indicated clearly that factors other than high interest rates are contributing to GDP slowdown. As part of the policy document the guidance clearly states that evolving growth inflation dynamics would continue to influence future stance. This should be read as follow up to what the RBI said in its last policy on April "The reduction in the repo rate is based on an assessment of growth having slowed below its post-crisis trend rate which, in turn, is contributing to a moderation in core inflation. However, it must be emphasised that the deviation of growth from its trend is modest. At the same time, upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates". In the current ever worsening domestic macro environment and turbulent global economy can the RBI afford to act in such a way. ? Consider the last 3 economic statistics i.e WPI, Industrial Production and Q4 Gross Domestic Product it seems growth has moderated significantly with the threat of a general economic slowdown looming large. Not to forget joblessness rising consistently. To squarely put the blame for the current crisis on fiscal policy is uncalled for, rather there is a need for a co-ordinated approach to tackle the current threats.
NEED TO BE PRO-ACTIVE
One wonders why such a loose monetary regime cant be implemented to jump start the economy.
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