Trump’s threats

Apropos the editorial “Dollar diktat” (December 5), Donald Trump’s threats to impose 100 per cent tariffs, if BRICS countries devise an alternative system of payment currency to dollar, is unlikely to be empty rhetoric, given the kind of policies followed by the US during his earlier stint at the helm.

It cannot be denied that dollar still rules supreme and will continue to do so. Once the geopolitical tensions in Europe (Ukraine-Russia) settle down, China and Russia will also go back to operate through SWIFT. India needs to tread a careful and balanced path on the BRICS currency and must avoid alienating the incoming Trump administration. Even if attempts are made to evolve an alternative global currency to dollar, it will take a very long time to emerge. Except for a few countries, there will be few takers for Yuan as a global currency. European countries does not have any such dream of making Euro a global trading currency. As such, the course suggested by the editorial “a tightrope that balances all interests” is the best option for India.

Kosaraju Chandramouli

Hyderabad

Policy direction

This refers to ‘RBI MPC Meeting December 2024 Expectations Live: Will RBI announce rate cut tomorrow?’ (December 5).

Though as revealed in this report, the MPC is likely to stay put on the repo rate as retail inflation rose beyond its 6 per cent tolerance level in October. But given the growth dip in Q2, it will be a tough call for the MPC.

However, it may also prove to be a ‘litmus test’ for the RBI Governor, as head of the six-member MPC, since his current term expires on December 10. One has to wait and watch what the RBI Governor will do on D-Day.

Kumar Gupt

Panchkula (Haryana)

Monetary push

The article ‘Monetary policy must help the economy rebound’ ( December 5) has observed that a 25 percentage point cut in repo rate in December or a pause with 50 basis points cut in February 2025 can pump-prime the economy.

The private sector will benefit from a rate cut as lending rates will reduce, fuelling investment.

But, one really wonders why there is a drop in year-on-year government final consumption expenditure (from 13.8 per cent to 4.4 per cent) and government final capital formation (from 11.6 to 5.4 per cent). These two components of gross domestic product (GDP) are interest-inelastic.

Put differently, the government could have loosened its purse strings on education, health, safety and capital projects to enhance employment and growth. But, unfortunately, that did not happen.

S Ramakrishnasayee

Chennai

Published on December 5, 2024