Article;
Analysts see Rajan not losening rates despite better CPI data.
Comment;
I think the Urjit committee report on the time-table to
bring inflation down to 8% by January 2015 and to 6% by January 2016 will only
stretch the tightening-cycle and will prolong the industry's stress due to high
interest-rates. As soon as we will be able to bring inflation down there will
be more room to start loosening-cycle. I think the RBI should try to bring
inflation down as soon as possible so that we can loose monetary-policy to
promote economic-growth. The latest twist in the story has been the chance that
government will decide inflation target for the RBI to achieve by using
interest-rates. If the government has to decide inflation-target we can easily
expect it to debase the currency because government by nature it is
extravagant, they spend more than individuals (Wagner's Law). In INDIA (a
developing/emerging) economy demand always likely to exceed supply because we
are not producing much at competitive price to match supply with demand. We are
supply constrained... The government should try to improve supply... Narendra
Modi has a wonderful concept to overcome supply side constraints. He said he
would set-up a fund under price-stability, a price stabilization fund to
improve supply of goods, especially food, to the economy... No doubt it is like
increasing subsidy and moreover in a different currency but the advantage with
the Indian scene is that we need domestic-currency investment especially in
agriculture products and their marketing... Industry can do it...
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