RBI approach to Monetary policy be Vigilant and Accommodative.
This refers to the monetary policy announced by RBI on the 9th April 2025 in the midst of growing turmoil in the global economy thanks to the jittery and chaos generated by the uncertainties by Mr Trump and his Tariff measures to make America Great Again. Understanding the sudden changes seen in global economic conditions and having adverse impact on the imported inflation front, supply and demand conditions in global trade, and change of position of dollars and Gold as Reserves of world central banks, the RBI has announced its bold monetary policy by changing its stance from Neutral to Accommodative and reduced the repo rate for the second time by 0.25 percent to 6.50% and expect the MSF and SDF adjust to 6.75% and 5.75% respectively. However, the GDP growth has been brought down from 6.70% to 6.50% . Though the inflation is stated to be benign as of now and is expected to be under control and within the 4% target , the fact remains that food inflation expectation continues to be a threat and the cost of funds continues to rule high . The widening inequality between the haves and have nots, the irrational rates of GST along with other taxes and levies though expected to soften thanks to the direct tax reliefs given in the recent budget 2025 26, the cost of goods and services continues to remain very high due to freebies and mis / poor governance and the expectation of high savings, which is unreal. High consumption demands, and increased growth in employment, investment and production seem to be chasing a mirage and for this to be a reality, there is a paramount need to fine tune the fiscal policy with the Monetary policy closely monitored by data collection and effective and meaningful governance.
T V Gopalakrishnan.
( This letter sent to Economic Times not published ).
