IS THE ECONOMIC TIMES NOW BENT ON MALIGNING THE RBI GOVERNOR AND THE FMO FOR THEIR HISTORIC DECISIONS??!!
[Please read the news below, which somewhat points to that direction.. Where did the RBI say, that it would NOT go for repeated cuts? It only said, its action would depend on the trajectory of inflation. So, where is the problem...? Who told the Economic Times, that inflation at around 6-7% is too dangerous for any economy? When we are importing inflation from outside, how much can the monetary tightening do, excepting bringing disaster to the India Inc?? Now these newspapers want to destroy the growth oriented Indian Economy!! What a shame....!! Some of these parasitic journalists have no work.....really disgusting...!! We need to forget inflation for the time being and stop believing in the government data....!! If India needs to sell them to the outside world it needs to have a growth oriented economy--this is the ultimate bottomline. Destroying business & industry and bringing stagflation/deflation, to control inflation cannot be called a prudent step..!! Also, inflation is caste and creed neutral, which means it affects all--so forget it for the time being....Moreover, I am sensing something sinister in such kinds of sudden planned move by the Economic Times....Are they involved hand-in-glove with some of the shorters in the market....the traders who were short lost heavily yesterday, and would lose further in the coning days....!!]
It's silly to believe that the central bank will preserve its majestic detachment and fierce independence when the government of the day has to take the blame for India's lost years. There's nothing unusual about it.
In fact, economists and analysts should look beyond the mountain of data to spot the partners - Mint Street and New Delhi - which are separated by convention, but meet half way in hard times.
It's a season for compromises, and on Tuesday morning markets had a taste of them. Faced with angry corporate lobbies clamouring for cheaper money and an embattled government that's desperate to tell the world it means business, RBI governor D Subbarao unexpectedly slashed interest rates by half a point.
If the governor had to give in to such a demand, he had also extracted his part of the deal: in the same breath Subbarao cautioned bankers and traders that the April policy doesn't really mark the beginning of a series of rate cuts.
Many, of course, would scotch such a give-and-take supposition. They could argue that Subbarao had indeed sensed that a quarter-point rate cut would have achieved little, and it was high time to gamble on growth. Or perhaps, he doesn't want to go down as a central banker who was always behind the curve. After all, his April policies are big-bang stuff, full of surprises.
Last time it was a 50-basis point rate hike; this time it's a 50-bps cut. No one is sure when and by how much 'lazy bankers' will pass on the rate cut to home buyers and small businessmen.
One of the governor's deputies had recently screamed at bankers for failing to lower rates despite lower CRR - the slice of customer deposits that banks have to set aside as cash with RBI. On Tuesday, the governor gently nudged bank CEOs to find a way to reduce rates. Clearly, he has to deliver.
But there's something that doesn't add up. Subbarao and his team expect inflation to be at around 6.5% next March. Few are willing to buy the number: petrol prices are yet to be raised, several companies have not fully passed on the higher indirect taxes, and unless there is a steep correction in oil and global commodity prices, chances are inflation will touch 7.5% a year from now. No one knows it more than RBI.
But, assume for a moment that all the rest are wrong and RBI is right - that the central bank indeed believes that inflation will be within the target set by RBI. Then, if that's the case, why is the guv sending out the message that there won't be more rate cuts?
Sources: The Economic Times
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