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Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
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Growth at the RBI's discretion? 
(Wed, 15 Dec Pre-Open) 
 
The Indian central bank has played its part well. Whether it comes to reigning inflation or stimulating growth. All this without allowing too much of cheap liquidity to percolate into the economy. With the monetary policy review approaching, all eyes are again on the RBI. But is it possible for the RBI to control all factors affecting the economy's growth potential? We don't think so. And a chain of events that have unfolded in recent days confirm this belief.

Indian policy makers used their vested interests to obstruct 22 consecutive days of parliamentary session. The deadlock reportedly came at a cost of Rs 1.7 bn to Indian taxpayers. Needlless to say that the funds could have been used more productively in a capital starved nation like hours. But priorities are clearly misplaced. The lost hours have deferred debate on critical reforms that could have been growth catalysts.

Commodity prices have assumed new highs in recent months. And cartels like the OPEC have ensured that essential inputs like crude oil get dearer in the days ahead. The impact of such decisions on inflation is clearly beyond the RBI's control.

The importance of better infrastructure to India's growth cannot be emphasized enough. However, a plethora of social and bureaucratic barriers have dogged investment into the same. Issues relating to land acquisition and environmental clearances assume prominence here.

Thus markets may be enthused with inflation number coming at a 11- month low. It may be assumed that the RBI will pause on its interest rate hike policy this time. But does that mean higher growth for the economy? Very difficult to say indeed. For as we have cited here, there are several factors beyond the central bank's scheme of affairs. And they have the potential to thwart even the best intentions of the RBI.

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Jul 27, 2017 (Close)

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