Article;
It will be illogical for RBI to cut rates.
Comment;
It is true that the RBI
should be more concerned about inflation than the rupee exchange rate. We read
that Indian rupee is undervalued and that its right value is Rs 76 per dollar,
according to Mac Donald Currency Index. The RBI should be worried about inflation
which has sent the real interest rate in negative and people’s savings are
losing value because inflation is higher than the interest rate they are
getting for their savings, which has reduced the rate of deposits. They are
discouraged if they know… Our inflation rate is 9% and if our currency
depreciates 10% once a year we should not be surprised. Our inflation rate and
our depreciation rate is almost same therefore (i think) we have a correlation,
and there should be... I think if the RBI concentrates on inflation it will
keep the currency depreciation in check because tighter monetary policy will
release less liquidity in the system…
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