Dr Rajan’s last Mon Pol Statement-Tomm

with olympics going and India about to win test, there is hardly any space for wonks. But tommorow’s Mon Policy statement will make headlines, but maybe totally as the Dr Rajan’s last Monetary Policy statement. So whats the state of economy:

For Cut:

  1. The Central Banks round the world has done the heavy lifting, FED Fund rates are close to 25bps, as is the case with ECB. The CBs in Countries like Japan and Switzerland  have gone even to negative territory. So RBI better comply.
  2. IIP is languishing, IIP of Capital goods is infact negative for last seven months. Inspite of fiscical stimulas private investment is yet to pick up. Can interest rate entice the animal spirit.

Status Quo:

  1. June inflation number are perilously close the 6%, the outer bound. The hard earned credibility should not be languished.
  2. Good Moonsoon, will bring cheers to agriculture sector, and should revive rural consumption. But its better to wait for the actual results.
  3. FED has not raise the rate this cycle. The commentry which followed is hardly conclusive. No point in cutting the rate now, and then raise it to arrest the capital flow.

Essentially this blog feels that there is little room for cutting rate this cycle.





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