*****Rbi Rate Hike impact: As RBI hikes rates, I feel a little sorry for the government with the LIC IPO on: Mythili Bhusnurmath – The Economic Times

Clipped from: https://economictimes.indiatimes.com/markets/expert-view/as-rbi-hikes-rates-feel-a-little-sorry-for-the-government-as-the-lic-ipo-is-on-mythili-bhusnurmath/articleshow/91314878.cms

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As RBI hikes rates, I feel a little sorry for the government with the LIC IPO on: Mythili Bhusnurmath

ET NowLast Updated: May 04, 2022, 06:56 PM IST

Synopsis

“It is important to be a realist not just being an optimist and this is something that was staring the RBI in the face for quite some time. We have now reached a stage where inflation has become an obstruction to growth rather than their accommodative policy spurring growth or helping growth. The results of the easy monetary policy continuing for longer than warranted has actually become an obstruction to growth.”

“I just cannot help thinking about LIC, the government disinvestment and how things could have been different if only the RBI had woken up in time,” says Mythili Bhusnurmath, Consulting Editor, ET Now

If I use the phrase that denial has become desperation now or perhaps reality has dawned, something which should have happened three months ago is happening now, but it is happening in a more concentrated manner and that will shake the market, will I be wrong?
Well it was always bound to happen. If you have been behind the curve and you have been sleeping on the war chest, which the RBI has been doing for more than a year now, then, when you act, you always have to slam the brakes down much faster than otherwise.

The governor spoke about being an optimist. It is important to be a realist not just being an optimist and this is something that was staring the RBI in the face for quite some time as only one of the MPC member Jayant Verma has been saying that there was absolutely no case for continuing to have accommodative policy when prices have been rising so relentlessly.

Both the CPI as well as WPI have been on the upward trajectory for a very long time. This is something that is inevitable. Unfortunately, the RBI waited too long and now when it had to act, it had to act much faster than was warranted, had it acted earlier. The problem unfortunately with monetary policy acts with long lag is whether this will be able to curb the inflation in time.

Read Also: Everything would begin to slow now except for inflation: Maneesh Dangi

I am not sure because we have now reached a stage where inflation has become an obstruction to growth rather than their accommodative policy spurring growth or helping growth. The results of the easy monetary policy continuing for longer than warranted has actually become an obstruction to growth.

RBI MPC announcements: Here’s how experts view the changes

In an unscheduled press briefing on Wednesday, the Reserve Bank of India (RBI) Governor Shaktikanta Das said that the Monetary Policy Committee (MPC) in an off-cycle meet unanimously voted to hike rates. The policy repo rate has been hiked by 40 bps to 4.40% with immediate effect. ET Now caught up with various market experts to understand how far this decision is going to create an impact on the market.

Unfortunately in all this, I just feel a little sorry for the government because the LIC IPO is on. Nothing could have been worse for the government than this. First of all it came out too late and now we have this. So I just cannot help thinking about LIC, the government disinvestment and how things could have been different if only the RBI had woken up in time.

Look at the bright side; this truly means that RBI is independent?
I am not so sure about that. I think its action all along was because its independence had not been asserted.

In Video: RBI MPC announcements: Here’s how experts view the changes

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