The fall in inflation is primarily due to the high base effect of spiralling and back breaking inflation over the last many years and the precipitious crude price fall in international market. It is a big question mark as to whether this optimism of fall in inflation is shared by the average consumer who still find that the price level of most the commodities rising at the retail level especially, vegetables, oil, pulses etc. The problem in India and even all over the Globe is that inflation data is not comprehensive and many question marks remain over its mode of computation. The irony is that retail inflation ticked upwards at 5% in December despite the high base effect and the RBI Governor betrayed his own statement of not willing to respond to piece meal data month-on-month. He probably was pressurised by the Industrial and Government lobbies to do what he did. This cut is only tokenism and a symbolic cut and might not prod Bank to cut their borrowing rates and rather it will only induce them to set right the asset-liability mismatch due to the distressed assets that are piling up in Banks in the form of NPAs. Alas, it is the savings class who are the worst hit. During times of high inflation statistically, they have to be contend with negative rate of returns and even if inflation relatively falls due to base effect, still their returns might not turn positive as the RBI will keep cutting rates whereby they are in a lose-lose scenario.
RBI always gives dates and notifications for rate cuts. This is insider trading with our RBI gov involved to give rate cut before market starts. Normally rate cut or increase comes with RBI notifications during market time by 11:00 am . SEBI should check this. Not only investors but any Indian citizen has the right what government or RBI are upto new policy. This is a cheating I will stress that SEBI please look into this our governor has cheated Indian citizen (might have favoured FII) to give policy like a companies result before market open. Beware we are losing trust in our Countries most powerful Federal governor.
The rate climb choked infrastructure projects. Capital intensive industries dried out on debts. With Oil prices decreasing Less infltionary pressure RBI testing waters before making a leap Good one
Re: Good to see downward cycle
by Vascado on Jan 16, 2015 10:10 AM
Rates never were high which is a myth. What always matters in a economy is real interest rates and they were in negative when aligned with inflation. The borrowers indeed had a free run at the cost of savers. It is a case of robbing peter to pay paul.
Industry hawks say that inflation is under control but donot utter about price correction, and the govt. takes this on the face of it without going into the facts and causes the rate cuts AND the end result will be akin to UPA times.
