Letters: RBI rate cut is a washout

This refers to the editorial “Now, the supply side” (January 30). The Reserve Bank of India (RBI’s) policy response has been based on the assumption that inflation has moderated. Or, should we say the banking regulator has finally succumbed to the pressures of New Delhi? The cornered RBI has had to acquiesce during one quarter or another. To be fair to the monetary authority, how long can it hold on to the government’s pressures? It may appear that the ball is now in the government’s court. But does it bother? Given the historical responses of the government, it has merely pushed the issues of inflation and growth to RBI, and to the corporate sector, in that order. Even assuming the transmission of monetary policy is smooth, RBI’s policy changes would not do much to revive growth. Why is the government hesitating to clear supply-side bottlenecks? Can we assume that such bottlenecks have political undercurrents, so the government has not done anything? Given India’s economic travails (inflation, a huge fiscal deficit and an unrelenting current account deficit), the monetary policy changes are just a washout.

K V Rao Bangalore

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