The RBI's monetary policy statement today makes this rather innocuous statement
"the picture it presents of a robust economy, with growth having picked up significantly over the last three years, is at odds with still-low direct measures of growth of production, credit, imports and capacity utilisation as well as with anecdotal evidence on the state of the economic cycle."
There is some lingering doubt on reading Monetary Policy Statement of the Reserve Bank:
It says at one point
"Oil prices have firmed up in recent weeks, and significant further strengthening, perhaps as a result of unanticipated geo-political events, will alter the inflation outlook. "
In yet another part of the atement, it says:
" Furthermore, supported by lower international energy prices, there is a welcome intent to shift from spending on subsidies to spending on infrastructure, and to better target and further reduce subsidies through direct transfers."
How does the Governor explain away the increase in fuel prices, post budget? How does the Guv explain the inflation potential in stalled projects?
With the RBI decision to cut rates, an already ebullient stock market will go up further. Make in India gets a boost.
The Rupee may need to expect a decline with the intent of both FinMIn and RBI apparently to avoid too much of a strengthening; Read this extract from the RBI Statement
"..the Reserve Bank does not target a level for the exchange rate, nor does it have an overall target for foreign exchange reserves. It does intervene on occasion, in both directions, to reduce avoidable volatility in the exchange rate. Any reserve build-up is a residual consequence of such actions rather than a direct objective."
Views expressed without any risk or responsibility
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