Interest rates set to fall, SBI may take lead
[When
the policies of keeping Interest Rate high is not ushering a drop in
inflation, what is the use of pursuing it for years and kill the golden
goose of growth? RBI says it has a definite target of inflation
management; now how can it compare inflation figures of the US, growing
at around 2% with that of India whose worst figures are more than double
and arrive at their own targets? I feel India should have inflation
around 9-10% in normal conditions, considering the growth. Inflation
would slowly come down when the infrastructure bottleneck and supply
side factors are addressed. The government has already taken such
measures in the form of FDI in retail. Such high interest rates
indirectly stops spending in the economy and at the same time creates
infrastructure bottlenecks. This is a sort of ostrich like policy of
breaking the nose of self to help the progress of other. Over the years
RBI has turned itself into a self defeating organization, with bad
policies and poor economic outlook. The arm--chair economists who
proliferate various business channels, should understand that India is
gradually progression towards DEFLATION; which is even more dangerous.
RBI bosses, should come out of theories and act using their grey
matters. It is unfortunate that these people are still holding their
chairs and cannot be impeached. Giving autonomy to a constitutional
chair, does not mean giving the power to misuse or abuse it. I sometimes
feel RBI is acting as the 2nd fiddle of the opposition, which also
would be happy if India's growth rate falls and the economy collapses.
Our FM is trying to do, his best to cure the economy but with the
step-motherly treatment from RBI, and also from his own man in the form
of Dr.C Rangarajan, a former RBI governor, the things are becoming more
and more difficult. It is time to remove Dr.C Rangarajan and bring in
another neo--economist who can guide India in terms of crisis. Down with
the old school of economists....!! The rally in the Indian bourses is
more due to FIIs inflow and not due to retail investors, RBI should
retrospect as to why Domestic investors are shying away from the capital
markets!!].
MUMBAI:
A day after lowering country's growth forecast to 5.8 per cent, the
Reserve Bank today said it will step in if economic expansion falls
below the current levels of 5.5 per cent.
RBI also expressed the hope that the economy will move up from the current quarter.
"We will certainly respond if growth moderates (from the present level), but that is unlikely as per our projections. We expect growth to inch up from here onwards," RBI Governor D Subbarao said to a particular query whether RBI will intervene if growth falls below the current level of 5.5 per cent.
He was answering questions during the customary post-policy conference call with economists and analysts.
The economy grew by 5.5 per cent in the first quarter of the current fiscal, a tad better than 5.3 per cent it had reported in last quarter of the previous fiscal.
Yesterday, RBI had lowered its growth projection to 5.8 per cent from 6.5 per cent while unveiling the half-yearly monetary policy.
RBI also kept interest rates unchanged, disappointing Finance Minister P Chidmabaram, industry and markets.
In the April policy, the RBI had cut the GDP forecast to 6.5 per cent from the 7.1 per cent it had predicted earlier.
The Governor while noting the steep fall in growth, said in the policy document, that inflation fighting is still the core objective of the monetary policy, and cited high fiscal and current account deficits as the reasons for elevated price index, thus neglecting the fiscal consolidation road map the finance minister unveiled a day before the policy.
Accordingly, he also increased the year-end inflation target to 7.5 per cent, from 7 per cent, the second upward projection this year.
To another question whether there is a threshold level of growth beyond which RBI will take rate actions, Subbarao said there is no threshold for the central bank when it comes to GDP growth.
"First, on the threshold growth level, we don't have any threshold growth level. But we will certainly respond should growth moderates much more than we now expect. But, that is unlikely according to our current assessment.
"And you will note the GDP growth projection for the full year is 5.8 per cent. On an average, growth in the remaining three quarters have to be higher of 5.5 per cent. We expect growth to inch up from here onwards," the Governor said.
RBI also expressed the hope that the economy will move up from the current quarter.
"We will certainly respond if growth moderates (from the present level), but that is unlikely as per our projections. We expect growth to inch up from here onwards," RBI Governor D Subbarao said to a particular query whether RBI will intervene if growth falls below the current level of 5.5 per cent.
He was answering questions during the customary post-policy conference call with economists and analysts.
The economy grew by 5.5 per cent in the first quarter of the current fiscal, a tad better than 5.3 per cent it had reported in last quarter of the previous fiscal.
Yesterday, RBI had lowered its growth projection to 5.8 per cent from 6.5 per cent while unveiling the half-yearly monetary policy.
RBI also kept interest rates unchanged, disappointing Finance Minister P Chidmabaram, industry and markets.
In the April policy, the RBI had cut the GDP forecast to 6.5 per cent from the 7.1 per cent it had predicted earlier.
The Governor while noting the steep fall in growth, said in the policy document, that inflation fighting is still the core objective of the monetary policy, and cited high fiscal and current account deficits as the reasons for elevated price index, thus neglecting the fiscal consolidation road map the finance minister unveiled a day before the policy.
Accordingly, he also increased the year-end inflation target to 7.5 per cent, from 7 per cent, the second upward projection this year.
To another question whether there is a threshold level of growth beyond which RBI will take rate actions, Subbarao said there is no threshold for the central bank when it comes to GDP growth.
"First, on the threshold growth level, we don't have any threshold growth level. But we will certainly respond should growth moderates much more than we now expect. But, that is unlikely according to our current assessment.
"And you will note the GDP growth projection for the full year is 5.8 per cent. On an average, growth in the remaining three quarters have to be higher of 5.5 per cent. We expect growth to inch up from here onwards," the Governor said.
Courtesy: Times of India
