Monetary Policy 15 Feb 2012

India Black Money Report: CBI underestimates black money at Rs 25 lakh crore

India Black Money Report: CBI underestimates black money at Rs 25 lakh crore

The Wikileaks is known for leaking and publishing even the most hidden US military secrets, shocking the entire US government machinery. Wikileaks once threatened that it will publish the details of Indian black income account holders in foreign countries. But, the Julian Assange formed entity never published the list; a testimony to the power of India’s black income account holders.             Now, the Central Bureau of Intelligence has made a soft estimate that black money of India is around Rs 25 lakh crore or nearly US$ 500 billion. The amount is equal to the size for the Indian government to execute  two year&

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Monetary Policy 07 Feb 2012

Why the RBI cannot counter appreciation and inflation simultaneously?

The leading issue related to the conduct of monetary policy is that central banks all over the world are implementing monetary policy under a globalized economic environment. Specifically, faster mobility of global financial capital has caused macroeconomic management problems for the central banks especially for that of the emerging market economies. Capital inflow and outflow are exerting significant pressure on both exchange rate and domestic liquidity. The Reserve Bank of India also faces tough task of simultaneously managing exchange rate and domestic liquidity to ensure overall stability in our economy.             As me

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Monetary Policy 07 Feb 2012

High interest rate rather than inflation is the macroeconomic problem for India right now

High interest rate rather than inflation is the macroeconomic problem for India right now

The Indian economy is struggling under the clutches of a hard interest rate regime. Investment has been reduced as rate of interest of loans roared. Investment has responded to the RBI’s high interest rate call and economic growth rate has come down accommodating the high interest rate.   Fortunately, inflation is now showing signals of decline and is nearing towards a comfortable zone, driven by negative food inflation. Investors and business people are expecting that the RBI will initiate soft interest rate signals soon.                 The most controversial issue in monetary policy execu

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Monetary Policy 11 Nov 2010

Why the monetary policy stimuli from the RBI are not working?

The RBI has been making a group of stimulus measures ever since the appearance of financial stringency in our economy in mid September 2008. The CRR has been reduced by four hundred basis points from the high nine percent in September 2008 to five percent. Another key policy rate- the repo has been reduced by 350 bps to 5.5%. Both these measures means that the economy is operating in a relatively easy liquidity- soft interest rate regime akin to that existed five years back.   Further, there is always complementarity between interest rate and the level of inflation. The inflation rate is now brought down to comfortable levels.  Hence the overall interest rate in the eco

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