RBI is being ultra cautious, acting as inflation hawk: Swaminathan Aiyar
In a chat with ET Now, Swaminathan Aiyar says that we have an ultra cautious RBI acting as a hawk at this particular point of time not having the same kind of sunny outlook that the finance minister wants to project.
You were starting to say that you were surprised with this move, your initial thoughts?
The RBI is being ultra cautious. It is saying that all kinds of things can go wrong; commodity prices can go wrong, the exchange rate may depreciate, it may put pressure, we do not even know about the monsoon. These uncertainties are there I would say in every single year, there is nothing unique about this year. The RBI has taken the position that there is an issue of transmission, if earlier on interest rate cuts were not being transmitted and right now you are seeing, if you would like a transmission of those rates, the market rates have gone down very significantly so the RBI has probably taken this thing that what is happening in the market is already sufficiently positive, I do not have to do more, let me be conservative and worry about what happens if various things go wrong and it has specified the things that can go wrong; much higher commodity prices, some panic on the emerging markets sharp depreciation which pushes up import prices, a bad monsoon. So we have an ultra cautious RBI acting as a hawk at this particular point of time not having the same kind of sunny outlook that the finance minister wants to project.
You were starting to say that you were surprised with this move, your initial thoughts?
The RBI is being ultra cautious. It is saying that all kinds of things can go wrong; commodity prices can go wrong, the exchange rate may depreciate, it may put pressure, we do not even know about the monsoon. These uncertainties are there I would say in every single year, there is nothing unique about this year. The RBI has taken the position that there is an issue of transmission, if earlier on interest rate cuts were not being transmitted and right now you are seeing, if you would like a transmission of those rates, the market rates have gone down very significantly so the RBI has probably taken this thing that what is happening in the market is already sufficiently positive, I do not have to do more, let me be conservative and worry about what happens if various things go wrong and it has specified the things that can go wrong; much higher commodity prices, some panic on the emerging markets sharp depreciation which pushes up import prices, a bad monsoon. So we have an ultra cautious RBI acting as a hawk at this particular point of time not having the same kind of sunny outlook that the finance minister wants to project.
