Is the rate slashing mood of the apex organization fusing optimism in the current economic scenario?
The Reserve Bank of India (RBI) has cut down the repo rate by 25 bps, which is completely in line with the expectations of the veterans in the financial circuit. The supreme monetary authority of the country sights obvious reasons for the cut and its magnitude, which has left the market in an optimistic state. The move is aimed at tackling the seemingly perpetual problem of inflation, which is expected to come down because of the infusion of liquidity into the system. While some exponents of the finance world, present arguments which suggest that the rate slashing is inadequate, and that the current sorry state of the economic affairs in the country demand the same move of a much higher proportion, RBI’s stand is vindicated by the logic behind it.
The tough position that the RBI currently sits in, doesn’t give it the freedom to meet the demands of the aforementioned suggestions of some liberal economists, which is also perfectly logical. One can though, from the clues taken by the current trend, expect the apex organization to carry the rate slashing momentum onto the next two meetings, which would eventually meet a figure of around 75 bps. The elevated number is by most economists, being considered the ideal solution, as it strikes a fine balance between the traditional conservativeness that the RBI is known for and a radical element introduced because of the rare economic circumstances that India faces.
The masses although way down in the chain, will surely reap the benefits of the move, in times to come. The strategic action, will lead to the organization reconsidering the diesel price hike, and also the reduction of inflation which would reflect in the pricing of regular commodities. While the move is expected to improve the macro-economic scenario, the trickling down of these improvements, onto the living of the masses, is something that is inevitable and that further justifies the scale of the measures taken.