Too Utopian | Business Line

Too Utopian | Business Line

My letter in Hindu Business Line, September 26, 2015:

Rating the ‘cut’
This refers to ‘Economists divided on RBI rate cut demand’ by Vinson Kurian and NS Vageesh (September 25). The common sense perception is that the RBI will cut the base rates by 25 basis points. That will satisfy the finance ministry with which Raghuram Rajan has to at least maintain the present level of comfort for several reasons much beyond repo rates. By opting for such a stance, which will not have much impact on any of the economic indicators including inflation till end FY 2016, it will also silence the other ‘school’ of economists for the time being. After all the impact of the earlier rate cuts aggregating 75 basis points is yet to percolate fully to the ground level.
To buy peace for an extra month between reviews, the RBI should consider reverting to a quarterly schedule for monetary policy review. There are enough fora for the RBI to share its mind on policy issues between such reviews and technically, monetary policy measures including revision of base rates need not always coincide with such reviews. A lower frequency of reviews may reduce the scope for external pressures and lobbying.
MG Warrier


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