With the Reserve Bank of India (RBI) raising key rates by up to 50 basis points (bps), Jagannadham Thunuguntla, equity head, SMC Capitals Ltd, tells Puneet Wadhwa that the central bank struck a perfect balance between inflation and growth. Excerpts:
What is your take on monetary policy announcements? Do they meet your Rexpectations?
RBI has increased repo rate by 25 basis points (bps) and reverse repo by 50 bps, while holding the cash reserve ratio (CRR) steady. This is a commendable policy decision of striking a balance between inflation and growth. No doubt, the inflation containment was on top of their minds when they took this decision.
But, don’t you think that CRR should have been tinkered with?
Surely, RBI would have liked to hike CRR as well. However, the recent 3G and BWA spectrum auctions have helped suck out about Rs 1,06,000 crore from the system.
This has given breathing space to RBI to postpone the decision on raising CRR. Technically speaking, the 3G and BWA auctions have acted like a proxy CRR rise.
Further, the RBI actions are clearly suggesting the seriousness with which they are trying to handle inflation. During the 2008 crisis, RBI stood by the economy by providing rounds of liquidity stimulus.
Do you think RBI and the other central bankers across the globe will continue to raise rates in future?
The central bankers across the world have provided bouts of liquidity stimulus during the period of 2008 crisis. Now, these bankers are working hard to handle the side-effects of such liquidity stimulus.
It appears the philosophy behind such measures is that austerity is the way to get prosperity.
Jagannadham Thunuguntla, Equity head, SMC Capitals Ltd
