Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Curbing RBI's freedom is a bad idea
Mon, 3 Aug Pre-Open

India's economic growth is at a crucial stage. The government has been criticized for not doing enough to boost growth. Important bills are still stuck in Parliament. Labour reforms have not seen the light of day. Large infra projects have still not been revived. PSU banks are almost in a moribund condition. Is it any wonder that private investment has not picked up?

In such an environment, investors have every right to expect the government to display a degree of urgency and clarity. Instead, all they have experienced so far is disappointment. The government has failed to live up to expectations. What we are now beginning to witness is perhaps something sinister. Instead of taking responsibility of the mess in the economy, the government seems to be trying to interfere with independent institutions, an example being the Reserve bank of India (RBI).

The recent Indian Financial Code (IFC) draft proposes a government majority on the panel that will set interest rates. The IFC also proposes to take away RBI governor's veto power. We believe this is a clear cut case of the government trying to meddle with the independence of the RBI. The issue as we see it seems to be the RBI's desire to go slow with interest rates cuts. There have been many voices from within the government that have been clamoring for more rate cuts. One can understand corporate India's blind and foolish lust for rate cuts. However, the same should not be the case with the government.

As per an article in the Economic Times, the rating agency Moody's is the latest to severely criticise this move. The government has been forced to clarify that these are only proposals and the final policy will take time to formulate. Understandably the RBI is expected to turn down the proposals. Trying to take control of monetary policy is something that we strongly disapprove of. Whatever the differences between the RBI and the Ministry of Finance may be, we believe formulating monetary policy is a highly technical activity which demands specialised skill sets. It is best left to the competent and experienced individuals in the RBI.

There is no doubt that the RBI has been an excellent regulator. It is among the few public institutions India that maintains its independence, integrity and competence. The best way that the government can ensure the RBI continues to do what it does best, is to leave it alone.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Curbing RBI's freedom is a bad idea". Click here!

  

Views on News

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

More Views on News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps (Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Intraday Trading for a Living (Fast Profits Daily)

Feb 15, 2021

In this video, I'll cover your queries on intraday trading and also share my view on how to decide stop losses and target prices.

Top 5 Stocks Mutual Funds Bought and Sold in January 2021 (Sector Info)

Feb 16, 2021

A look at what India's top equity mutual funds bought and sold in January 2021.

I Would Recommend this Small-cap Stock Over Tesla (Profit Hunter)

Feb 16, 2021

Do you enjoy reading Tesla and Bitcoin stories? Here's a not so famous small-cap stock to profit from the rise of EVs.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS