Business Standard

A pre-emptive bold move

Related News

The Reserve Bank of India in its for FY13 embarked on by delivering a larger than expected dose of 50 bps cut in the (now at 8.0%). This action was guided by essentially two factors — that growth has declined substantially below the post-crisis trend rate, and core moving within the comfort level. With this front loading of monetary easing, the has nudged the government to galvanize its efforts to accelerate fiscal consolidation efforts and stimulate business confidence by focusing on mitigating supply bottlenecks through structural reforms.

By giving precedence to growth in this policy, the RBI has strived to address the concerns on macroeconomic stability manifesting through deterioration in the twin deficits, and banking sector asset quality in the economy. While upside risks to inflation persist, they largely emanate now from supply side inadequacies, wherein the government needs to step in expeditiously to bridge the demand-supply gaps. The RBI’s relative comfort on the level of core inflation and its future trajectory seems to indicate that the monetary policy has played an effective role in containing demand led inflationary pressures.

Nevertheless, managing headline inflation poses multiple challenges. As articulated by the Reserve Bank of India, the elevated level of crude oil prices and pending adjustments to domestic administered petroleum prices, coupled with suppressed inflation in the context of coal and electricity prices and recent depreciation in Rupee, are likely to limit any significant monetary easing going forward.

Departing from its earlier approach, the Reserve Bank of India today has delivered a calibrated and preemptive action to facilitate synchronization of efforts between the monetary and fiscal policy to improve the growth potential of the economy.


Rana Kapoor, Founder, MD & CEO, YES Bank

Read more on:   
|
|
|
|
|
|
|

Read More

RBI sees limited room to ease policy

Duvvuri Subbarao, the head of Reserve Bank of India, said on Saturday there is room for monetary easing but it is limited, and there were upside ...

Quick Links

More news from Finance Rss icon

HDFC Bank to send debit card PINs via SMS

Move not just environment friendly but also convenient and saves time of both customers and bank

Cash may no longer be king

Debit card use at POS terminals increasing at rapid clip, transactions at ATMs declining

Foreign banks increase customer engagement to tap HNI client base

Apart from increasing the number of offers, banks are looking at also rolling out differentiated offers in order to woo consumers

Back to Top