RBI should maintain statusquo on policy rates and its operational autonomy.

The author has argued well to avoid any rate cut by the RBI.The measures if any taken by the Govt on the economic reforms front will bear fruit only after a considerable time lag and RBI should not factor those measures to effect any reduction in the policy rate. Inflation, measured by CPI which is indicative of the price movements in respect of items consumed by the masses,has been moving from bad to worse and the position would further worsen with the recent partial deregulation of oil and gas prices.The railway fares have been steeply increased although justifiable from the point of view of improving railway finances, it will have its own cascading effect on the prices.The common man gets no relief from the Govt but RBI can come to his rescue to some extent by giving a signal to all that RBI is for price stability as mandated in the preamble of the RBI Act. The governor draws his power from the Act and he can ensure to maintain operational autonomy by his actions.RBI can do it.




Dr.T.V.Gopalakrishnan

Posted on: Jan 27, 2013 at 22:42 IST in response to an article on'Rate Cut advocates are wrong' in Business line dated 28/1/13.