The Hindu Business Line : On different path

The Reserve Bank of India, appropriately, did not take the path treaded by the US Central Bank, the Federal Reserve. Like the Fed, the RBI did not succumb to meet the market expectations on a rate cut. The monetary policies of India and the US are not linked enough to warrant a one-to-one cut.

Current inflation

Rightly, the RBI has focussed more on the question of whether the real domestic economy has been affected or not and if it warrants a cut? With money supply and bank deposit growth rates remaining higher then the targets, the central bank resisted cutting the rates. .

RBI’s outlook

Though the global developments pose risk to economic growth, the domestic activity continues to be investment-driven and aggregate demand pressures clearly persist. The real GDP growth rate was maintained at 8.5 per cent where the expectations were of moderation.

The RBI outlook on industrial sector continues to be positive. The monetary stance this time also focussed on credit to employment-sensitive sectors — perhaps those that have been affected by the global downturn and rupee appreciation.

The RBI will continue to respond to any evolving situation with conventional and unconventional measures. And there are no major changes expected in the interest rate levels in the short run. The central bank will wait for incoming economic evidence to conclude a perceived slowdown, if any, to cut rates.

(The author is CEO & CIO, Quantum Asset Management Company Pvt. Ltd. He can be reached at Devendra@QuantumAmc.com)

More Stories on : Credit Policy | Economy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
A costly status quo

To prosperity through poverty

Adopting a vigilant stance

A sedate statement

Staying on course

On different path

Conditions justify the ‘no-change’ stance

Nuanced change

Apt approach

Credit Policy