The Rudderless Bank of India

Abstract

Indias economy is undergoing hard times. Growth has slowed and corporate profits have been falling. For the fiscal year ending this March, barring data quirks, real GDP growth is likely to end up below 7%. This is significantly below the forecasts made a year ago by senior policy officials in Delhi and Mumbai. Simultaneously, inflation has been very high despite a bumper harvest that has lowered food inflation from December onwards. The sustained rise in prices over the last few years is clearly manifest in the new lightweight R5 and R10 coins and is evident to one and all. Although the rupee has a symbol now, it has lost much of its substance. Policymakers are in a bind. In response to the slowing economy, RBI cut the cash reserve ratio (CRR) to 5.5% at its last policy meeting. Further cuts in the CRR and maybe interest rates may be under way. The financial markets and industry lobbies are expecting and aggressively demanding such cuts. At this juncture, whether RBI should try to boost the flagging economythat could tank drastically if the eurozone crisis worsensor solely focus on bringing inflation under control, is a tough call. Read more at: https://www.financialexpress.com/archive/the-rudderless-bank-of-india/922605/