Sunday, January 8, 2012

Can he resist the pressure and temptation?

 I am referring to Mr.Subbarao who handsomely withstood pressure last month.When we talk about interest rate cuts, the first salvo you are facing is that 'everybody expects rate cut'. Why everybody expects rate cut and still RBI may not doing that? Let me think on your behalf :)

1.  Food Inflation figures what we saw is a mirage. Our diet is not only the Onion and Potato. We consume much more than that for example protein diet and milk which is not coming down and in fact it is going up.
              a) This food inflation is just a part of over all inflation. Over all inflation is still high and not showing signs         of cool off.
              b) This vegetable prices also seasonal. next month it may shoot up. So cutting rates based on these figures would be foolish to be frank.
               c) Expectation of further rise in fuel price is going to affect Inflation again.

2. When we say 'everybody expects rate cut means who are we referring? Real Estate developers, Real Estate Investors and Stock Market Investors..sadly these people are less than 5% of our population.

3. A rate cut now will again feed for the bubble on one hand in RE sector whereas, I am 300% sure, that this is not going to help the Industrial output because our industrial problems are not due to rate cuts.  See the export and import data to figure out why?

You know what. RBI knew all this. But whether they can withstand the pressure from Industry lobby and Politicians? Time only will tell.

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