Policy - Measured but not bold: H Khorakiwala

I would describe the credit policy pronouncements as measured and stable but, unfortunately, not bold. The Reserve Bank governor indeed deserves kudos for laying the foundation of a cohesive economic policy and further liberalisation of the financial system. His efforts in simultaneously increasing the repo rates and injecting liquidity are certainly even-handed measures but I wish he showed a little boldness.

RBI has its own limitations and a mere tweaking of interest rates does not impact core inflation, such as food inflation. Such forms of inflation have nothing to do with availability of money. This type of inflation is impacted by government intervention, policies, supply chain, etc. I would draw attention to the recent measures adopted by the Japanese and American governments. These economies have ‘growth’ firmly and unwaveringly in their focus and are pumping massive doses of monies to revitalise their economies. They, of course, have the advantage of lower inflation vis-à-vis India’s.

RBI seems intent on using the interest rate tool to rein in inflation but this has borne limited results so far. Given my pharmaceutical background, I can't help but ask: If it's a medicine, it has to work – right?

But then, there's no denying that Raghuram Rajan's appointment and his subsequent policy measures have brought in a sense of comfort within the industry. The choppy forex markets over the last two quarters had led to drastic changes in rupee valuation and this had hurt the domestic pharmaceutical industry, dependent on imports and exports. Dr Rajan has brought sanity to this chaos.

Given this track-record and his stature as an economist of international repute, I would now expect him to take bolder steps in managing monetary policies.

H Khorakiwala
Founder, Chairman & CEO, Wockhardt Group