Monday, March 17, 2014

RBI needs to be cautious now.



This refers to your editorial Monetary Policy Dilemma ( Business Standard dated 18/3/14).It is too early to make a call by the Reserve Bank  on its present monetary  policy stance based on the Inflation index both CPI and WPI. The election is round the corner and the manipulation of supply side which is the major cause of inflation, to register a steep fall in food inflation cannot be  totally ruled out. In our econo-political system where monetary policy's role is only subservient to that of fiscal and administrative policies, the need for RBI to be abundantly cauttious to adjust its policies to the highly fluctacting inflation index is paramount and RBI cannot afford to faulter and alter its policy stance  as per the market sentiments.Better RBI maintains its Status quo till a new Government takes over and wait for its ideologies.      

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Dr.T.V.Gopalakrishnan

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