I don't fully agree with Mr. Kulkarni's assessment of Mr. Rajan. lot of people looking at India from an investment perspective seem to think he has been overly aggressive. In my opinion they are all looking at it on a short term basis. The Indian infrastructure is woefully inadequate as you have pointed out that any increase in demand cannot be matched with supply in a short period of time. This means that reducing rates that causes an increase in demand will almost certainly increase inflation. With the currency already sitting at historic lows vis-a-vis the dollar and the foreign reserves still not at a very high level, any regulator worth his salt would pause twice before adding another cylinder to the economy. Mr. Rajan has been repeatedly saying that the government needs to give him confidence that they are eliminating the bottlenecks before he reduces rates. It is not for a lack of trying.
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I don't fully agree with Mr. Kulkarni's assessment of Mr. Rajan. lot of people looking at India from an investment perspective seem to think he has been overly aggressive. In my opinion they are all looking at it on a short term basis. The Indian infrastructure is woefully inadequate as you have pointed out that any increase in demand cannot be matched with supply in a short period of time. This means that reducing rates that causes an increase in demand will almost certainly increase inflation. With the currency already sitting at historic lows vis-a-vis the dollar and the foreign reserves still not at a very high level, any regulator worth his salt would pause twice before adding another cylinder to the economy. Mr. Rajan has been repeatedly saying that the government needs to give him confidence that they are eliminating the bottlenecks before he reduces rates. It is not for a lack of trying.