Expert Zone
Straight from the Specialists
Critical steps for a faster recovery
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The economy seems to be heading for a hard landing. The problem is not entirely of our making; partly it is the spillover of the crisis in Europe. Other Asian countries have also been affected but we were hit the hardest.
Surely, the economy was exposed to inflation for nearly 25 months now. The RBI initiated conventional measures. The repo rate was raised in 13 instalments from 4.75 to 8.5 pct. It made no change to inflation. The high cost of credit only inhibited investment. New investment, for instance, dropped from 6 trillion rupees per quarter to 3 trillion rupees.
Inflation was initially confined to select food articles. The increased expenditure on food diluted demand for manufactures and slowed down industrial growth. Further, food inflation increased wages and salaries since these are linked to cost of living, spreading inflation to all sectors.
Gold prices: Bubble or fundamental
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Suddenly all eyes have turned to the yellow metal. Some say that it’s a bubble while others give a lot of demand-supply reasons. Fall of the dollar and other economic reasons suggest that it has miles to go.
Signs of cooling in Indian economy
(The views expressed in this column are the author’s own and do not represent those of Reuters)
This was not unexpected. The RBI has taken every care to cool down the economy with successive increases in interest rates. The results are now beginning to show.
Will higher interest rates lower growth?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The Reserve Bank of India (RBI) increased the repo rate by 50 bps on May 3 and there was an outburst of opinions that the rate of GDP growth will drop. The consensus seemed to be that it would drop to 8 pct, a 100 bps less than what we had been used to.
Of course, May 3 was the first time in two years that the RBI raised the repo rate by a hefty 50 bps. In the earlier eight installments, the increase was only 25 bps.
Lower profits, uneasy market
(The views expressed in this column are the author’s own and do not represent those of Reuters)
On April 11, the CSO announced a further dip in industrial growth to 3.6 percent, bringing the Sensex down 189 points. That index was for February, the expectation about March is no better — which leaves the market a little cold.
