INSUBCONTINENT EXCLUSIVE:
India is becoming the gold standard for monetary policy in Asia, if not the world.While global markets are giddy from hints that the Federal
Reserve may cut interest rates, the Reserve Bank of India has been easing since February
Just as important, the RBI has been very consistent in its message: Borrowing costs need to come down to juice growth
Passive inflation and the central bank's full tank of gas make the case to cut even stronger
After Thursday's trim, the benchmark rate is 5.75 per cent.The RBI's approach is correct
There's no point targeting inflation if growth is waning and the very thing you're aiming at is dormant
Thursday's quarter-point reduction in the benchmark rate, the third in as many policy meetings, underscores the theme: "Growth impulses
have weakened significantly,'' according to the central bank's statement
"A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern.'' The RBI
made clear that "global economic activity has been losing pace" and declared its stance to be "accommodative." Much focus is rightly given
to Beijing's efforts to pull both fiscal and monetary levers; as big as India's economy is, China's is much larger
But the People's Bank of China tends to be opaque and is trying to thread the needle between buttressing the economy and fretting about
Japan, meanwhile, gets plenty of attention as a pioneer of unconventional policies - yet its economy remains a parable about how booms can
And remember back in February, the consensus was that the Fed had just paused before resuming hikes
Few serious observers believe that now.So give Governor Shaktikanta Das his due
The RBI's rate cut in February was risky - few economists anticipated it - but appropriate
The signalling power was immense
Officials followed that up with another reduction in April
The outlook has only deteriorated since then
Central banks in Malaysia, the Philippines, Australia and New Zealand concurred
India was, and still is, ahead of the curve - all the more remarkable given emerging markets tend to follow the Fed
Even the chaos surrounding the withdrawal of most banknotes from circulation in 2016 has slipped from the foreground.It's important to
separate the manner of Mr Das's arrival as chief and the job he's done since getting there
Prime Minister Narendra Modi's team clashed with Mr Das's two immediate predecessors, which cast a whiff of politics over their exits
Mr Das was drawn from the ranks of bureaucracy rather than the central bank
It was clear the government didn't want any freelancing.For a while there, it seemed like the RBI chief's office was a revolving door
Given Mr Das's success in monetary-policy development and execution, India would do well to keep him around
Quite right, too, given all the predictions for the country's economic greatness
India needs this to succeed.(Daniel Moss is a Bloomberg Opinion columnist covering Asian economies
Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.)Disclaimer:
The opinions expressed within this article are the personal opinions of the author
The facts and opinions appearing in the article do not reflect the views of TheIndianSubcontinent and TheIndianSubcontinent does not assume
any responsibility or liability for the same.
