Interpretations of Raghuram Rajan's monetary policy review

Business Standard: Rajan putting house in order before tapering

Business Standard: Inflation-wary Rajan skips Fed party

The Economic Times: The buck doesn’t stop at the RBI: Lowering food inflation is the govt’s job

The Financial Express: RBI wastes Fed moment

Sajjid Chinoy of JP Morgan: Balanced and pragmatic

Niranjan Rajadhyaksha of mint: Why has Raghuram Rajan hiked the repo rate?

Tamal Bandyopadhyay of mint: Repo hike: A signal of Rajan’s lack of tolerance for inflation

Andy Mukherjee of Reuters BREAKINGVIEWS-Raghuram Rajan wants to be India's Paul Volcker

Indranil Pan of Kotak Mahindra Bank: Rajan responds to the need of the hour

Saurabh Tripathi of The Boston Consulting Group: Raghuram Rajan needs to transform RBI into a multitasking innovator

Siddhartha Roy of Tata Group: Usual prudence takes over

Expert Views in The Economic Times: RBI raises repo rate, CRR on hold

How Raghuram's rate hike is a blessing in disguise

Mayur Shetty of The Economic Times:Is Raghuram Rajan walking ex-Federal Reserve chief Paul Volcker’s talk?

Fundamental & Technical Views

Ajay Shah's interview in CNBC about macro economy and fundamentals. He is talking about RBI's surprise rate cut move, inflation threat (CPI numbers versus WPI numbers and their respective combination), robust revenue growth of listed companies, dilemma of IIP numbers and GDP data from CSO, economic problems (obviously not BOP crisis like early 90s).

Gautam Shah of JM Financial talking about technical's of Indian markets. He is one of finest readers of technicals of markets and according to him, market is in the consolidation range from January's rally and could rally to a level of 5750-5800 if it breaks out 5350 with concise volume and conviction. He is bullish on Banking sector, ADAG pack and Indian Rupee.

Interesting Updates

RBI Governor took quantum leap by decreasing Repo rate 50 basis points when most of the analyst community was expecting 25 basis points. Below are some of the important highlights of his speech...

--> Repo rate reduced by 50 basis points to 8 percent and consequently Reverse repo would be adjusted to 7 percent and Marginal Standing Facility (MSF) rate gets back to 9 percent as both of these are pegged to Repo rate with 100 basis points lower and higher respectively.

--> Now banks can borrow 2 percent under from MSF adjustments from earlier 1 percent.

--> RBI expect GDP growth of 7.3 percent for 2012-13 against the government's projection of 7.6 percent.

--> According to RBI, inflation for March 2013 is 6.5 percent.

--> Non food credit growth of 17 percent.

--> Potential Risk: 1. Oil price and fear of supply disruptions

2. Deterioration of fiscal deficit

3. Government Borrowing

4. Financing C/A deficit

5. Structural shift in preference of food basket

--> NBFC's (particularly Gold Loan Companies) borrowing limit has been reduced to 7.5 percent from 10 percent of bank's capital.

Ruchir Sharma of Morgan Stanley talking about Indian growth scenario.

George Soros observation about EURO.

The Great Depression and the Great Recession: What Have We Learnt?

Read an interesting speech by Prof. Michael D. Bordo about above mentioned topic...

Click here to read.

Interesting reading

Read an interesting article in rediff about how much salary different Prime Minister of respective countries draw?

Couple of interesting facts:

* Singapore PM earns (around Rs. 9 Crores/annum) 45 time of Indian PM's (around Rs. 20 Lakh/annum) salary

* American President earns (around Rs. 2 Crores/annum) one fourth of his Singaporean counterpart

* Kenyan Prime Minister earns Rs. 2.2 Crores/annum which is 240 times Kenyan GDP/person and by this ratio he is the highest paid politician.

Click here for full article.

Prime Minister's New Year Message: A SWOT ANALYSIS

Today, 31st December 2011, last day of the year, Prime Minister Manmohan Singh gave a rather lengthy speech, which is unusual of his nature!

While wishing citizens of the country, he summarized socialistic eras problems, nations achievement after 1990s reforms, upcoming challenges.

He identified 5 key challenges:

1. Livelihood Security (education, food, health and employment),

2. Economic Security,

3. Energy Security,

4. Ecological Security and

5. National Security

While addressing first challenge PM gave very firm and confident speech regarding the power of education (taking his own example), food security, employment creation and health standards.

In second challenge tackling, an economic turned politician, Prime Minister scored most out his total speech (as it is his STRENGTH). But the possible WEAKNESS is whether he and his government will be able to push through the much needed reforms! Whether they will be successful in convincing the allies, states, opposition parties in GST implementation, FDI in retail, subsidy reduction and etc which might become 2nd generation reforms and can become India's OPPORTUNITIES in coming days.

Again Energy Security has been the worst problem and will be the THREAT for future super power. At present we are pathetically mishandling the production, procurement, supply and distribution. The big question is whether the PM will be able to take his stance as firm as during Nuclear deal scene in empowering National Power Production companies.

Ecological security is a very complicated and conflict of interest situation as country is hungry for Industrialization, Service oriented development & Infrastructure improvement. Whether his Cabinet ministers will be able work cordially without fighting on National TV sets!

Final one is National security, which is a clear THREAT for the country from outside as well as internally.

Bottom line:

If Prime Minister and his Cabinet Minister perform to their full ABILITY and CAPACITY, the above mentioned 5 challenges can be easily achieved!

Click here for PM's full speech.

Food Security Bill

Today, Indian cabinet cleared the Food Security Bill.
Yesterday I read an article related to same, by Kirit Parikh in TOI.

Interesting readinds

As I was writing from couple of months about growth faltering due to various issues like inflation, interest rates, international demand dampening and etc., October IIP came dismally at -5.1% as compared with September's revised numbers of 2.0%. And major problem is all the important sectors like Capital goods, Manufacturing and Mining are in negative except Electricity growth. For more click here.

An interesting observation and opinion from Ruchir Sharma of Morgan Stanley about Economic Growth and Inflation (or Disinflation). Click here for more.

Interesting readings

Anti-National Politics by V Anantha Nageshwaran in mint. Click here to read.

Seven rules of the road for managers by Richard Branson in mint. Click here to read.

India's Q2 GDP at 6.9%

India's economy grew at its weakest pace in more than two years in the quarter that ended in September, at 6.9%.

For more click here.

rediff: Time to end P-Note menace!

Read an interesting article on rediff about Stock market volatility, FIIs selling, P-notes, Rupee depreciation and disadvantages of P-notes.

Click here to read the article.

Eurozone crisis

In February I wrote on Euro zone currency going in the path of Bretton Wood's gold standard and thought of completing that article in follow on post, but couldn't do it for some reason.

Click here for that article.

Now Ajay Shah has posted an elaborated insight about Euro Zone crisis by Percy Mistry in his blog. Click here to read that article.

Demand and Supply

In September I wrote piece on "Demand being more important than supply" and I hope people who are in my mailing list would have received my mail posting (as I am not publishing my articles on my blog now).

Now you might be wondering, why am I digging September’s article again, because recently I came across an interesting debate on similar topic between Mr. Paul Krugman (Nobel Laureate, Economics) and two other Professors (University of Pennsylvania and Duke University) through their respective articles. Please check out what they are saying...

Supply Side Argument	Demand Side Argument
The other two professors are arguing "Supply-side policies can be an important additional tool to pull economies away from the low output–high unemployment problems that the bound generates".	Whereas Mr. Krugman is saying "The important thing is not to lose sight of the fact that what we have now is a demand problem. Demand, demand, demand".
http://voxeu.org/index.php?q=node/7258	http://krugman.blogs.nytimes.com/2011/11/13/supply-side-solutions-beware-wonkish/

Ajay Shah: Reining in the inflationary dragon

A critical feature of non-tradeables inflation is expectations. If people expect 10% inflation, they tend to wire high price rises into their negotiation of wage and other contracts. This generates inflationary momentum. Particularly in a place like India, where the institutional structure of monetary policy is primitive, economic agents have little confidence in the ability of policy makers to rein in inflation. As a consequence, inflation is highly persistent. Once high inflation sets in, economic agents expect high inflation to continue. There is a great deal of momentum in inflation.

Some argue that supply bottlenecks in India - such as hideous rules about mandis - are the cause of inflation.
The trouble with this explanation is that the supply bottlenecks have always existed. They have existed in high inflation times and in low inflation times. It is, thus, not possible to claim that supply bottlenecks have caused the inflation crisis which began in February 2006.

For more click here.

Middle class hypocrisy on the poverty line: Swaminathan S A Aiyar

I found this article interesting as lot of discussion is going on these days about Rs. 32/day/person being the poverty line. Click here for the article.

ET: Shankar Sharma's analysis

Its a good read, have a look at it. Click here to read.

Interesting readings...

Swaminathan Aiyar's article in ET, "20 years to an economic miracle".

"QE2 proves no silver bullet" in WSJ.

Roopa Kudva's article in mint "The return of investment growth".

"Rakesh Jhunjhunwala to ET: Golden period of Indian equities is still ahead", click here to read.

The Economist Magazine's "An Indian Summary".

rediff:How China's bullet trains are powering its economy

Click here for full article.

Interesting readings...

RBI's repo rate hike (and default reverse repo also) by 25 basis points, click here for information.

Raghuram rajan's recent article ("Money Magic") on monetary stance and growth. Mike Konczal's reaction to the article and Paul Krugman's comment for Rajan's article in support of Mike's reaction. And today, Mr. Rajan reverted back to those comments and reactions on similar line with Keynes' Paradox of thrift.

Renu Kohli's article on capital formation in mint.

Haseeb Drabu's article, "ABC of new Indian economy" in mint.

An interesting column in mint about "India's poverty in virtual world".

A view on Dollar.

Niranjan Rajadhyakha's view on Indian Inflation.

mint:Double - dip redux

Click here for information