IIPM MANAGEMENT INSTITUTE
It’s time RBI resorts to a logical, rational & neutral monetary policy stance
As the top
brass of the Indian economic brigade ramble on the rhetoric rhymes of the performance of Indian economy, one must not forget that in the current global scenario, the fundamentals of the Indian economy are as temporary, as Mr. Chidambaram’s and Mr. Reddy’s existence. It is very likely that the same ‘story’ on which the Finance Minister asks us to believe in, might become a ‘fable’ for future policy makers’ references as to how building ‘stories’ in air could be suicidal to an economy.
As evils like spiraling inflation, tumbling rupee, parched stock markets & unfathomable deficits were back in business, B&E had been continuously warning the RBI against its ridiculous moves to hike interest rates across the board; and had alternatively suggested sector specific credit flow controls. As if to vindicate our stand, on July 21, 2006, the Finance Minister finally gave a statement forecasting that interest rates will soft en in the future.
Though Chidambaram claims that this is because inflation has fallen down to 4.68%, what he conveniently forgets to mention is that in April 2006, the comparative inflation figure was just 3.5%; a figure that was thrown away to the wind with the illogical interest rate hikes in the same very months of low inflation. Of late, even the rupee depreciation has made it to headlines, falling to a 3-year low of Rs.46.99/47.00 per dollar. Any further decline will surely discourage invisible capital inflows that were made purely on the basis of forex rate strength.
This clearly signifies that we cannot depend on such kind of invisibles (which restricted current account def cit in FY 2006 to $10 billion, in spite of a monstrous $50 billion trade deficit) to bail out India in the future as well. Clearly, unless RBI follows a neutral monetary policy stance, the way the Indian cookie crumbles would be very similar to Ms. Shehrawat’s clothes! Thankfully, that’s all that Mallika has got to do with RBI.
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Source :- IIPM Editorial, 2006, Editor - Prof. Arindam Chaudhuri
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http://sonuright.mbablogs.businessweek.com/
It’s time RBI resorts to a logical, rational & neutral monetary policy stance
As the top
brass of the Indian economic brigade ramble on the rhetoric rhymes of the performance of Indian economy, one must not forget that in the current global scenario, the fundamentals of the Indian economy are as temporary, as Mr. Chidambaram’s and Mr. Reddy’s existence. It is very likely that the same ‘story’ on which the Finance Minister asks us to believe in, might become a ‘fable’ for future policy makers’ references as to how building ‘stories’ in air could be suicidal to an economy.As evils like spiraling inflation, tumbling rupee, parched stock markets & unfathomable deficits were back in business, B&E had been continuously warning the RBI against its ridiculous moves to hike interest rates across the board; and had alternatively suggested sector specific credit flow controls. As if to vindicate our stand, on July 21, 2006, the Finance Minister finally gave a statement forecasting that interest rates will soft en in the future.
Though Chidambaram claims that this is because inflation has fallen down to 4.68%, what he conveniently forgets to mention is that in April 2006, the comparative inflation figure was just 3.5%; a figure that was thrown away to the wind with the illogical interest rate hikes in the same very months of low inflation. Of late, even the rupee depreciation has made it to headlines, falling to a 3-year low of Rs.46.99/47.00 per dollar. Any further decline will surely discourage invisible capital inflows that were made purely on the basis of forex rate strength.
This clearly signifies that we cannot depend on such kind of invisibles (which restricted current account def cit in FY 2006 to $10 billion, in spite of a monstrous $50 billion trade deficit) to bail out India in the future as well. Clearly, unless RBI follows a neutral monetary policy stance, the way the Indian cookie crumbles would be very similar to Ms. Shehrawat’s clothes! Thankfully, that’s all that Mallika has got to do with RBI.
For Complete IIPM Articles, Click here
Source :- IIPM Editorial, 2006, Editor - Prof. Arindam Chaudhuri
For more IIPM info, Visit below....
http://aboutiipm.egoweblog.com/
http://iipm-web.blogspot.com/
http://iipm-info-iipm.blogspot.com/
http://iipm-progress-iipm.blogspot.com/
http://blogger-is-best.blogspot.com/
http://blogger-club.blogspot.com/
http://blogger-progress.blogspot.com/
http://blogger-source.blogspot.com/
http://iipmtop.blogspot.com/
http://iipm-best-b-school.blogspot.com/
http://industryiipm.blogspot.com/
http://www.sonulatwal.9k.com
http://sonuright.mbablogs.businessweek.com/
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