As expected yesterday, the RBI chief did come out with some
key measures which will be instrumental towards curbing inflation. He increased
the repurchase rate by 25 basis points, or 0.25 percentage point, yesterday to
7.75 percent, the second increase in two months. He also cut the marginal
standing facility, or MSF, and bank rates by 25 basis points to 8.75 percent.
These steps will ensure that there is enough liquidity in the market, observed Sachin Karpe.
In developing economies, delay in stimulus tapering by Fed has managed
to bring a lot of cheer. However, one must not forget the challenges posed by
domestic woes. Capital flows will remain intact but they will need a domestic
economy to keep them coming if Fed tapers the stimulus, as and when, Sachin
Karpe opines.
India’s industrial activity has weakened due to less
consumer demand suffered by inflation. Thankfully, an expected rise in
agriculture due to healthy rains this year has contributed towards the economic
growth to a certain extent. Add to it, increase in export growth and signs of
revival in service sector has added some boost.
Developmental and regulatory guidelines will help revive the
economy to a greater extent. Raghuram has been successful so far. Some steps
like new banking license and retail inflation indexed securities are two
measures that will remain eagerly awaited, said Sachin Karpe. These steps will have a real and a more effective impact
which will be long term.
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