Monetary Policy August 2nd 2017

Big day today in the history of Indian Economy because the Monetary policy created a record today. Heartfelt congratulations to the Indians because the central bank of India that is RBI has cut interest rates by 25 percent to bring it to 6.00% which is the lowest in 6 ½ years. A Big achievement and economy well in course of growing big. Celebrations can begin, people can enjoy. Maybe after reading this post completely….

Let me take a minute and explain a little about Monetary policy. Monetary policy is a process by the which central bank of the country controls the supply of money by doing various activities which are related to demand and supply creation. Most important factors taken into consideration are Inflation and Production. In India RBI is the authority which holds responsibility of Monetary policy, this monetary policy can change the game of growth to huge extent for any country. India has system of Bi-monthly monetary policy which means six policies in a year.

Now about the D-Day Monetary Policy that happened today on 2nd August 2017!

The base interest rate of India now stands at 6.00% which as I said earlier is 6 ½ years low figure. Such big thing that India has achieved and we all should be proud of that fact. Now you can have lower Home Loan interest rates, Lower EMI’s and so on … What if I say this is all something that had to happen almost 10 months ago which means 5 policies ago in October 2016.

Yes, you heard it right. The rate cut that was to come way back in October 2016 has come today and clearly Markets were in no mood to accept this fact and saw a fall end at of the day. That also means the growth of India for 10 months is now gone for toss. We start all over again.

Mr. Governor – Urjit Patel

Mr. Governor you have given lame reasons for not giving rate cut all this while and today when you give rate cut to make up for the messed-up situation. Are you given that role to ponder over past events or to predict future and act accordingly!  You spoke about increasing inflation and you see that inflation never hit 4% and today it is 1.5% and that is when you wake up or is this realization after Government hammering you for your dumb decisions taken in last policy. Other reason you talk about is the crude oil hitting 60$ which looks like a far stretched dream of yours.

Now after giving a small rate cut of 25bps which is of no use you talk about 18-24 months inflation and vegetable prices. When the policy decisions are taken looking at 2 months past data how are you balancing it with next 2 years?

People may enjoy this cut and celebrate it but I am bitterly disappointed and feel sad for Government and people of India for having a person like you as Governor.