Comments on Capital Mind: RBI Governor Subbarao Speaks on Emerging Market Ex...

The Article by RBI Gov. is well written. But in th...

2009-10-13T08:48:46.825+05:30

The Article by RBI Gov. is well written. But in the real world India has to follow the orders of US. Even if RBI wants to increase the rates, PM will not allow. He is a puppet of FED policy. India will follow the policy of export led growth atleast for the short term. That means inflation has to be accepted.

MK

Anon: SoS time will come, I think, when there is n...

2009-10-12T23:58:02.339+05:30

Anon: SoS time will come, I think, when there is no looking back; I'm a little concerned if this is still the right time. But yes, it is overvalued, and deserves some downside move.
Deepak: Agree with you that the RBI has more "pull" on interest rates on the way up.

Harikrishna: Let me clarify. We have been sterilizing since 2004. The big years were 06 and 07, in which the dollar fell, consistently, so it didn't help.
When it was no longer necessary, the RBI didn't do anything to stop the dollar rising dramatically (contributed to silly rise in inflation) which hurt everyone that hedged at the 38-42 levels. Then they have to pay interest on the MSS bonds, which is a fiscal problem, and they don't get anywhere close to enough on the forex reserves. So the whole sterilization thing had serious costs and didn't do much to actually help (i.e. the rupee appreciated anyhow).

Just found a nice RGE monitor article on it.

Hi Deepak, Apropos your comment that sterlization...

2009-10-12T23:09:40.569+05:30

Hi Deepak,

Apropos your comment that sterlization "doesn't seem to help," did you mean to say that it failed to work (as in failed to damp/restrict INRUSD exchange rate movements) or that it harmed its intended beneficiaries (or other innocent bystanders)?

In any case, thanks for this fantastic interpretation of governerspeak. May the Mighty FSM shower many thousand Kindles on you.

Hi Deepak, Good to have regular posts from you. ...

2009-10-12T13:08:38.640+05:30

Hi Deepak,

Good to have regular posts from you. I think monetary transmission is broken only on the way down in India, on the way up it works faster. We will hear the same cribs of a floor set my small savings and all that but that has not led to higher rate on savings, banks have lowered the cost of deposits but still seeing inflow, most borrowers will still be paying upwards of 10% on loans. While I have huge respect for RBI as a regulator they seem to have kids gloves when it comes to customer rights with banks, but yeah I will take RBI anyday over IRDA!!!

Hello Deepak, I feel it felt lonely for the pragma...

2009-10-12T08:56:01.569+05:30

Hello Deepak,
I feel it felt lonely for the pragmatic you over the last few monthy on the blogosphere, with everyone talking about catch-the-tail-for-a-bull-ride. I have been puzzled (though gladly had a few stocks running in my portfolio, which I have started to exit one by one), and your older posts reflect the same thinking.
I do not understand even now, how could our markets virtually double, and real estate prices stayed where they were (well, ~@80%) when in all probability we are entering the next possible bubble. Time to revive your SOS?

Prashanth