Reserve Bank of India raised rates 12 times in 18 months, causing growth to slump while inducing no discernible impact on inflationary pressures.
The market is braced for RBI Governor Duvvuri Subbarao to announce a 13th rate rise on Tuesday. Ideally, he instead would hold rates steady and allow time for an inevitable downward drift in price pressures as growth slows further.
The market is braced for RBI Governor Duvvuri Subbarao to announce a 13th rate rise on Tuesday. Ideally, he instead would hold rates steady and allow time for an inevitable downward drift in price pressures as growth slows further.
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| Reserve Bank Of India |
"Enough damage has been done," says Sanjay Mathur, chief economist for Asia ex-Japan at the Royal Bank of Scotland. "But they are so deep in the quick-sand that they are finding it hard to reverse course now and say food prices are not our problem."
Like most other economists, Mathur feels sorry for Subbarao. Hapless or not, the governor and his board have had precious little help from the government in tackling pressure points, such as supply bottlenecks in food.
