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Monday, 1 February 2016


It’s almost two and a half years now that we know Mr. Rajan, our RBI Governor. So we can foretell that he is not going to cut repo rates tomorrow. Has he become so predictable or volatile economic environment everywhere has given a sense of certainty to every central bank policy except of course Bank of Japan which surprised everyone. Let’s skip the reasons for the present uncertain world economy as it has become too boring to discuss and instead just give a thought to all the major monetary policies undertaken from the beginning of this year.

Starting with Mr. Draghi, he kept rates unchanged but signaled higher stimulus package from March. Madam Yellen did the same thing and her future guidance of quarterly interest rate hikes in 2016 looked hazy. Both these monetary policies made stock markets rise and shine after the first two volatile weeks of January. But nothing could match the Japanese monetary policy which adopted negative interest rates to give a kick to its economy slowly moving into slumber.

Alas! Mr Raghuram Rajan is not going to match up to them. He is used to doing difficult things and saying no to the whims and fancies of various interest groups and pundits of world economy. He has already reiterated that the government should follow the path of fiscal consolidation and that debt fueled growth would be hazardous for India in the long run. But taking into consideration government efforts in power sector and ‘Start Up India’ program, he might just give the much required space to the central government to maneuver fiscal consolidation with its budgetary targets. As he only said in his first speech, as RBI governor, “a central banker should never say never”.

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