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Mixed message

Whatever message the stockmarkets may appear to give, Friday’s credit policy statement was not entirely unexpected. It announced no further changes in the interest rates or in the cash reserve ratio of banks. But this came after sharp cuts in both these instruments in the last few days. With th ....Read more

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Mixed MessageBy: Salim Ambar Inamdar | Sunday , 26 Oct '08 14:25:26 PM Reply | Forward We are presently faced with a crisis whose contours are not yet clear. Making sure that there is no dearth of liquidity is top priority for RBI right now. However that can't be the sole concern of the central bank. In the quest to flush the markets with liquidity RBI cannot allow banks to overstretch themselves by lending to entities which are vulnerable in the present times of worldwide financial meltdown. The RBI is therefore justified in being cautious and not cutting rates after the sharp cuts during the previous weeks. Also it is dangerous to give banks a carte blanche to go on a lending spree by cutting rates or to allow bankrupt businesses to remain aflaot a liltle longer by accessing cheap credit. It is prudent to wait and watch and caliberate our response in accordance with the unfolding situation. RBI's ambuguity might just be of help in these times when temperance is the need of the hour and not foolhardy aggression.

Stranglehold of elections.By: Chandran Nair | Sunday , 26 Oct '08 0:50:10 AM Reply | Forward My humble opinion also is on the lines of reader 'Sunil', seen here. The best example of government's unbudgeted splurge was in regard to oil. Apart from the export oriented private refiners and sellers of periferral products like lubes, the entire refining/marketing is done by PSU's. So, when the Co's were left to accumulate losses, swallow subsidies themselves, or turn to bonds, these were dovetailing to the govt! The weight of economics factoring on such 'wishing away' style was evident in the govt stopping in its path of raising oil prices simply because of a letter from Sonia Gandhi! The monstrous pay commission largesse, already a large wound, shall turn septic, thanks to festering monetary markets around. Unless we loosen up the tension of vote hunt strangling pragmatic applied economics, total distortion will result. In my view, 'the brilliant reformist team' s credit for the leap is much less than the irrepressible Indian entrepreneurs', avoid scrambling things, be sensible !

Mixed messageBy: sunit | Saturday , 25 Oct '08 13:11:35 PM Reply | Forward Let this not happen that the team that led India into the spectacular economic recovery in the early 90s would drag it down in this last part of the decade. With substantial un-budgeted spending to gain short term popularity in this election year, the Government is cutting the branch it is sitting on. The impact of pay commission largesses will be much much more than what has been reckoned after the states increase their own salary budgets, They will come to the centre to be rescued shortly. The rupee depreciation will affect oil imports sooner or later. No measures seem to be taken to reduce Govt. spending. Nothing much is done to reduce the effect of the parallel economy of black money. Corruption levels are increasing in every conceivable area. It is high time that the top level A team swings into action in a realistic and practical way without bothering about vote bank politics.