Rate cuts won't revive India's stalled growth: Andy Mukherjee
finance that through their purchases of Indian stocks and bonds, but it would be unwise to rely on that, especially if India's broader economic improvements don't take hold.
Growth thus depends on what New Delhi unveils in February. Finance minister Palaniappan Chidambaram has promised fiscal consolidation and other reforms. If he avoids the temptation to indulge instead in vote-buying populist measures that increase the government's spending commitments, there may be hope not just of another rate cut, but of a recovery too.
CONTEXT NEWS
*The Reserve Bank of India cut its policy interest rate of 8 percent by a quarter-percentage point on Jan. 29, the first reduction since April 2012. To ease liquidity conditions, the monetary authority also pared the ratio of deposits banks are mandated to keep with the central bank as cash by a quarter-percentage point to 4 percent.
*In its quarterly review of economic and monetary developments, the central bank said that an improvement in investment climate is a "prerequisite for economic recovery" and that the "quality of fiscal adjustment remains a concern." Risks remain from "suppressed inflation, pressure on food prices and high inflation expectations getting entrenched into the wage price spiral," the monetary authority added.
*While demand conditions are "tepid," a current account deficit of more than 4 percent of GDP for a second straight year makes it necessary for the authorities to remain prudent while stimulating aggregate demand, the Reserve Bank said.
*Reuters: India's central bank cuts policy rate by 25 bps, as expected.
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