Brief post on RBI’s First Quarter Monetary Policy Review

by Manshu on August 1, 2012

in Economy

I do a post every time RBI does a review, but I feel these posts are getting increasingly pointless as not much has been announced in these reviews for quite some time now. This is not to imply that RBI isn’t doing all they should, but it’s just the reality that they can’t fight high inflation and low growth on their own, and the government has done nothing at all to help with either of those.

Nothing should have surprised anyone about today’s report, and perhaps the only notable thing about it was that it was tinged with more despair than usual.

They have lowered the growth estimate for the current year to 6.5% and it won’t be surprising that the actual growth number comes under that.

They have also said that you should expect higher inflation because of high crude prices and the deficient rainfall, and that points to the fact that they aren’t going to cut down rates in a hurry.

They acknowledge that the policy stance has lowered growth, but as usual, have emphasized that the government should take some action to make them rethink their stance.

Here is the relevant part from the policy.

While monetary actions over the past two years may have contributed to the growth slowdown – which is an unavoidable consequence – several other factors have also played a significant role. In the current circumstances, lowering policy rates will only aggravate inflationary impulses without necessarily stimulating growth. As the multiple constraints to growth are addressed, the Reserve Bank will suitably adjust its monetary policy stance.

As far as rates are concerned, the Repo and the Reverse Repo haven’t been changed at 8% and 7% respectively, but they have reduced the SLR from 24% to 23%, which I don’t know what that indicates since banks were actually quite above the 24% limit as far as I know.

I’ll keep this post brief, and if you’re getting glum reading this post, cheer up, at least you have electricity.

{ 1 comment… read it below or add one }

Bhavin August 1, 2012 at 2:52 pm

🙂 Yes, at least we have electricity in our region. I wanted to ‘like’ this post, not least because of your last line, but couldn’t see any way to simply ‘like’ it without logging in to FB or G+ or Twitter.

Sure, I have accounts on all of these, but I am reluctant to sign in merely to ‘like’ one post, because then I end up spending too much time there and my work suffers. I then curse myself for not having enough discipline blah blah. 🙂

I suggest you look at the Dilbert blog where one can simply click on the thumbs up or thumbs down icons below each post – and see if you can implement something similar here.

Regards.

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