
India’s Ahluwalia Says “More Room” for Interest Rate Cuts
India’s central bank has “more room” to cut interest rates further to combat economic slowdown and a global recession, according to Montek Singh Ahluwalia, deputy chairman of the nation’s Planning Commission.
Parliamentary elections scheduled for April and May complicate efforts to boost the economy because the government is banned from announcing new fiscal policies or stimulus steps until the voting is finished. Prime Minister Manmohan Singh’s government has backed the monetary stimulus by lowering taxes and increasing spending on infrastructure.
...“The new government when it comes into place probably in early June will almost certainly continue the fiscal stimulus policies we have followed,” said Ahluwalia. “We will use the opportunity, the scope that is available for monetary policies, to support these fiscal policies.”...
.... India’s politicians are one of the “major problems,” Rogers told the Wharton India Economic Forum via videolink from Singapore. The country has the “single worst bureaucracy in the world.” If a person can deal with that, “there are fortunes” to be made by investing in India, Rogers said.
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Some observtions:
1. Good to see that the RBI is looking to cut interest rates. With the inflation reaching near zero level the "Bank" does not have any choice left also. Borrowing has to become cheaper
2. On the fiscal expansion- I didn't realize that the govt is banned from implementing such expansionary fiscal policies. Thus it becomes more important to push for monetary expansion
3. Bureaucracy is bad for any economy. However, what bureaucracy does is that it acts as a friction against a fast moving machine. Higher the friction, slower will the machine run. If there is no friction then the machine will run smoothly and quickly- this can also make it be uncontrollable.
Bureaucracy without corruption is acceptible but bureacracy with corruption is devastating. I think the former is present in India.
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