"First our pleasures
die - and then our hopes, and then our fears - and when these are dead, the
debt is due dust claims dust - and we die too."
-
Percy Bysshe Shelley (English, 1792-1822))
Word for the day
Persiflage (n)
Light, bantering talk or
writing.
(Source: Dictionary.com)
Malice towards
none
"I AM KALAM!"
Some said, some unsaid
It is commonly believed amongst borrowers that the RBI’s rather
disproportionate emphasis on inflation has proved to be counterproductive.
Though many professional investors and global financial and rating
agencies have been quite appreciative of the governor's strong focus on price
stability, the borrowers find little evidence to the effect that the monetary
policy has achieved any meaningful success in reversing the trend in inflation
in past two years. The argument that without such strict measures the price
situation could have been worse is only hypothetical.
The global commodity crash, RBI's maneuvering in currency market
to keep INR relatively stronger and material erosion of producers' pricing
power due to diminished demand (both investment and consumption) has resulted
in producers' price inflation being in negative territory in 2015. But that is
no cause of celebration and rightly no one is celebrating.
There is some credible evidence to suggest that the tight
liquidity conditions might have exacerbated the supply side constraints; which
in turn are responsible for persistency in inflationary trend in consumption
articles. In fact RBI has recurrently admitted that the supply constraints are
more structural in nature.
I would not like to join this debate at this point in time. Though
in my firm view, RBI has certainly not managed the growth-inflation trade off
in desirable fashion.
The half hearted efforts to control prices that were
overwhelmingly burdened with the guilt of constricting growth at a time when
the whole world is struggling with serious economic slowdown have yielded
little. Structurally the price situation might be as grim as it ever was. The
growth has faltered and looks more threatened than before.
I am totally in favor of free and fair monetary policy regime. RBI
shall have full autonomy in determining and conducting the monetary policy.
However, the autonomy should not come without accountability. RBI,
through its governor, should be made accountable to the public for the course
of policy it chose to follow. Like in case of many autonomous central bankers
he should periodically testify to the people, through the parliament, about the
appropriateness and adequacy of its policy measures in light of the extant
circumstances and the future outlook based on such circumstances.
The Finance Minister, Planning body (NITI Ayog) chief, and RBI
governor are commonly seen talking to each other through press conferences and
TV channels.
Poor investors and common public are left in the lurch to decipher
what is said, what is said without being said, what is meant by that is said,
and what is left unsaid.
I am interested in knowing what catastrophe will occur if policy rates are
cut by 100bps, along with 200bps cut in SLR and sale of US$10bn in open market.
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