RBI's Concerns...

Article;

RBI Rate Cut- Who Gains From Fall in Interest Rates


Comment;

There is misconception that the value of investment in bonds has increased with low interest rates because inflation has also gone up to 20% also, not long back, just two years. Has it compensated the loss in the value of money or the purchasing power of the bonds it terms of other goods and services? Because if it has not the purpose remains unsolved because the purchasing power or value of bonds has reduced between the time when bonds were purchased and time when it is en-cashed, although the amount of money has increased. To restore the value of money the return on bonds must be greater than the rate of inflation…   Article;  Monetary Policy Cannot be Eased Further Says D Subbarao

CAD is going to detoriate further because repo rate by all major economies has been reduced and that is for the purpose to infuse demand in the these economies and will increase prices if it actually increases demand and especially prices of fuel. We often hear that oil importers are demanding more dollars. Because that this time we have to shell out more dollars and we do not have enough of that. Therefore we need to find new sources to earn more dollars or we need a stronger currency so that we can buy more dollars. The RBI to earn dollar can invest in dollar denominated assets or US government bonds or the government can give impetus to our export sector by lowering tariff barriers. This is the best way to earn foreign exchange and will also increase employment within the economy. But that chain is missing either due to low demand in trading partners economy or high interest rates within our own economy. Another thing we can do is to demand with our trading partners that we will only accept Indian rupee in exchange of our goods and that would help the economy with a strong rupee because demand for rupee will go up…