Letters: Rajan's spell

This refers to the BS poll on the Reserve Bank of India (RBI) rate cut, "Wait till April for rate cut by RBI" (November 25). I notice that the respondents were asked if they expected the RBI to cut the repo rate in the forthcoming monetary policy review meet on December 2. Even if they had been asked the more interesting question of whether RBI should cut the rate, my guess is that the result would not have been much different. Such is the spell cast by RBI Governor Raghuram Rajan on policymakers, financial players, economists and media alike that visualising a rate cut is now tantamount to advertising one's own economic illiteracy, if not a cardinal sin as such.

After Rajan's daring declaration earlier that targeting retail inflation will be the main focus of monetary policy, every drop in inflation (to as low as 5.52 per cent in October in the latest instance, well below the January 2015 target of eight per cent and lower than even the 2016 target of six per cent) has been countered by erudite commentary by the RBI chief and his deputies on the nature of the drop, sustainability in the face of uncertain global trends, inadequate action by the government on the supply side and what have you. It looks like Rajan alone knows the right time to cut rates, while lesser mortals are free to amuse themselves with the guessing game every two months.

Rajan has gone well beyond the usual remit of anchoring inflationary expectations: he has spectacularly succeeded in anchoring rate cut expectations.

Parthasarathy Chaganty Mumbai

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