‘Below-target inflation, need for internal boost to demand led to a 25 bps rate cut': The Hindu Business Line
June 21, 2019
This refers to the report “Below-target inflation, need for internal boost to demand led to a 25 bps rate cut” (The Hindu Business Line, June 21). Despite Deputy Governor Viral Acharya’s curt observation that ‘In spite of my dilemma, I vote-albeit with some hesitation- to front load the policy rate cut from 6 percent to 5.75 percent’, overall mood of the MPC is not apologetic about the cut and there seems to be no need for negativism on that count.
Having said that, one would like to read more into Michael Patra’s following observation:
“Monetary policy by itself cannot bring about a reinvigoration of economic activity. Monetary policy is taking the lead as the first line of defence, but a coordinated full throttle effort by all arms of macroeconomic management is the need of the hour.”
One hopes, the Finance Minister accepts this as a direct plea from RBI for fiscal policy support for achieving the results of the changed policy stance of the central bank, which includes accelerating economic growth. For the purpose, FM may have to tap the large non-traditional resources base of the country waiting to be exploited. Illustratively, accumulated wealth in the form of real estate, domestic gold-stock, external investments including those from NRIs and monetized wealth including agricultural income. Though moving away from the tradition of drawing from captive sources like disinvestment and asking PSUs and statutory bodies to cough up extra dividends or divert surpluses under guidance may be an uneasy option, it is a challenge worth accepting.
M G Warrier, Mumbai