There was an expectation that repo rate would be cut but shying away from it due to petro price hike RBI chose to tinker with just CRR and that too only by 25bps. As always the bureaucratic frame of mind of Subba Rao has been at work. It was time to be bolder as the adage goes ‘repent after doing it’.
ECB and US Fed have been liberal with monetary expansion to take care of growth and financial troubles of the stressed nations. India should learn from them, we have to give greater push to economy whenever the growth is adversely impacted. How else will the poor be brought up even above the so called poverty line which is itself placed by govt at very low point to misguide.
The govt’s announcements just before the policy meet of RBI conveyed , in a way, that the govt is serious at limiting the deficit. But the cue wasn’t taken by RBI. So, when fiscal consolidation is being attempted by the govt, more was expected from RBI.
The markets would have to pause a while to assess the situation before there is further advance and in this light the investors should resort to selective profit booking.