RBI has no option but to reduce the policy rate at least by 0.25% if not
by 0.50% to satisfy the FM and honor the market sentiments.Except
perhaps, a small reduction in whole sale Price Index, all other
parameters are not as per RBI's expectations.CAD may register a fall but
that alone cannot be expected to strengthen the other fundamentals of
the economy particularly investment and Growth.Savings have not been
picking up and the banks liquidity constraints remain where RBI cannot
be of any assistance. Credit off take is based on market borrowings and
how far the credit helps to improve production and expansion of the
economy is a matter of serious concern.Recycling of credit does not
happen in the context of accumulation of NPAs and restructuring of
assets.As rightly pointed out,how RBI is in a dilemma and how it is
going to face is worth watching and analyzing.
Dr T.V.Gopalakrishnan
( This comment appeared in Business standard dated 30/4/13 against the editorial Horns of a dilemma)
Dr T.V.Gopalakrishnan
( This comment appeared in Business standard dated 30/4/13 against the editorial Horns of a dilemma)
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