The Game of Numbers

Within two weeks of having taken charge Mr. Raghuram Rajan our current RBI chief, has taken the bull by its horns so to speak. The proverbial bull in the china shop- Inflation, has created havoc in our Indian growth story.

At the beginning of the Fiscal year expected GDP growth rate was pegged at 7.5% and inflation nearing 6%. Anyone with half a mind can understand that these kinds of numbers can mean only one thing- economic slowdown. Actual numbers are worse with Q4 FY2013 GDP growth reported as 4.8% whereas the consumer price inflation was 6.1% as on 30 Aug’13.

I believe that Mr. Raghuram Rajan’s stance on balancing the slow growth with accelerating inflation is a correct one. Even though the US fed’s decision to postpone tapering of stimulus has had a positive impact on our stock markets, however the real worry is the economic growth in the long run.

His decision today to increase the repo rate by 25 basis points was a tricky one as its impact will only be clear in the next quarter numbers. Till then we can only strap on our seat belts and sit tight, as Mr. Rajan is yet to prove his steering capabilities.  And hope that he will drive our economy out of the current fiscal mess and towards a more wholesome and shining growth story projected few years back.

I, however, on the other hand have no doubts on his driving skills and believe that we will reach the desired destination safely provided we can avoid the pitfalls of corruption and implement our economic policies effectively.