Not in anyone’s interest
However, headline inflation is well above RBI’s comfort zone of 5%, and assuming prices are not rolled back, inflation is likely to remain in the 6-8% range in the coming months. Thus, in addition to the recent CRR hike, with 2008 being a pre-election year and the obvious need to dampen inflationary expectations, one can expect additional measures both on the monetary and fiscal fronts.
The key question is: what’s next? On the fiscal front, besides the continuation of duty cuts/export bans, possible measures include price controls on manufactured products as well as bans on trading in sensitive agricultural commodities. On the monetary front, although the timing is tricky, further CRR hikes to drain out excess liquidity are likely.
Be the first to comment.