Wait until Budget: Why Raghuram Rajan wouldn’t go for a rate cut tomorrow
It is highly unlikely that Reserve Bank of India (RBI) governor Raghuram Rajan will tinker with the key rates in the fifth bi-monthly monetary policy review slated for Tuesday.
There is no real comfort on the inflation front so far, going by the available data, which warrants a rate cut.
In fact, there has been a spike in the retail inflation in the recent months. Within that, food inflation has been the most worrying part. Within food inflation, skyrocketing prices of pulses have been hitting the common man hard.
The retail inflation continued to inch up, rising to 5 percent in October from 4.41 percent in September and 3.74 percent in the month before, mainly on account of price pressures on food items such as pulses. The central bank has a retail inflation target of 5.8 percent by January 2016.
Food inflation, an important component of overall inflation, escalated to 5.25 percent in October, compared with 3.88 percent in September and 2.20 percent in August.
Pulses (such as tur dal, moong dal etc) are important for Indian households and the only source of protein-rich food for many of them since only few rural households can afford costlier eggs, milk and meat.
But, the price of pulses has risen by 42 percent in October, despite the efforts by the government in recent months to rein in the price increase through imports and by curbing hoarding. The RBI monetary policy has, however, very little say in tackling the current price rise since it is primarily due to a supply problem. The only way out is to increase production and tackle inefficiencies in supply.
Read full article: First Post
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