Economic councils set by the present government guide the formulation of all policies according to conservative text book theories. Those in the RBI are no exception as seen during the last two years. There is no chance of inflation coming down with super social programmes for the benefit of rural population across the country. RBI would stick to inflation going upward and hold on to the present status quo - no rate cut at all on 30 October next.
Interest rate cut is not yet justified. But chidambaram wants a "committed rbi", just like the congress wanted "committed judiciary" during emergency. Therefore a tussle between pc and rbi exists. Who will win is difficult to predict.
nothing to cheer about till date on modest IIP growth,why do we forget the inflation and mismanagement by the govt. by not taking timely action,whatever decisions are being taken are in haste as if congress will not see another day in power.
Though RBI has appreciated the steps taken by the government, it is insisting the credible on ground reality of reduction of inflation, before asking it to cut the rates. It is right in asking so. It is expected that the today inflation numbers will be higher than the previous month figure, there by not meeting the condition of RBI. Hence the chances are bleak for October 2012. Interestingly, the banks are asking aggresive CRR cut rather than the rate cut. They say more liqudity and higher return on their funds will give them room to reduce the rates. Probably from RBI point of view, this course of action makes sense.