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

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

This time it's not food inflation
Thu, 22 Apr Pre-Open

In another first of sorts, the central bank of India has set a trend most of its peers would find hard to follow. That of sharing its logic behind using monetary tools. But that's not the end of it. Since the last quarter, the RBI has also invited comments and suggestions from researchers on how it can better broadcast economic data.

In its second such interaction with us, the RBI governor Dr Subbarao spoke at length on his prime concerns. The former Ministry of Finance official also explained in detail as to what exactly is stoking inflation despite cooling food prices. According to him, it is no more food but manufactured goods that are governing price rises. He also fears that an erratic monsoon could result in further shortage of food. This coupled with increased demand for non-food products could make the RBI's job more challenging. Nonetheless, the RBI is now determined to measure inflation at consumers' level as also publish data on an ongoing basis. This is against its current practice of setting year end targets. For instance, the RBI's inflation (WPI) target for March 2011 is 5.5%.

Besides manufactured goods, rising interest costs may also weigh heavy on your budget. With the RBI getting increasingly worried about managing excessive capital inflows, interest costs are bound to move up. The credit to infrastructure projects has risen from 8% to 13% of bank loans in the past year. These will also be funded largely through higher cost deposits.

Other key factors that could affect RBI's inflation fighting are the global economic recovery and commodity prices. The RBI does not expect the recovery of developed economies to be very smooth. Having said that, the rise in commodity prices paints a very uncertain picture.

However, what is enthusing is that the RBI is not being a silent spectator to economic chaos unlike its peers in the US. In a much regulated manner, the Indian central bank is taking steps in the right direction. Be it managing liquidity to accommodate government borrowings or controlling volatility in forex rates. Call it baby steps or anything else; we believe the well timed moves can save many blushes in the days ahead.

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

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "This time it's not food inflation". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.