Jaggi goes for the jugular

Jaggi’s piece in Swarajya on the Monetary Policy Committee of the Reserve Bank of India contrasts with the Edit in MINT on RBI.

To an extent, strictly going by these two pieces, Jaggi’s piece struck a better chord than the MINT Edit.

Of course, I still believe that too much is made of India’s real rates. That diverts attention from the many failures of omission and commission on the part of elected governments.

Plus, I am a sucker for ‘tough love’ in micro or  macro matters. Examples abound:

  • Volcker with monetary policy in the USA from 1979 to 1981
  • Germany and Japan with their appreciating currencies and export growth built on productivity and quality
  • Rangarajan’s high real rates in 95-97 that ‘persuaded’ Indian corporations to de-leverage between 1998 and 2001 and be ready and hungry for re-leveraging and unleashing a capex cycle since 2002 (it turned excessive later)
  • Hong Kong’s real estate cycle deflation after the Asian crisis that lasted nearly a decade
  • Singapore’s approach to the real estate bubble since 2013, up to now

On balance, MINT Edit came across as a ‘gratuitous’ praise. Not wholly disproportionate but partially.

In other words, I am not sure RBI has done enough to deserve this praise. It may well, down the road. But, for now, it struck me as early days.

3 thoughts on “Jaggi goes for the jugular

  1. Its hilarious how quickly people complain about real rates! These people were nowhere to be found when rates were low from roughly 2010 to 2013. I’d say lets have at least 3 years of high real rates to compensate for the earlier undershoot. If RBI would have done the right thing then, we wouldn’t have to do it now, nor would the NPA problem have grown as much for as long, etc, etc.


    Liked by 1 person

  2. Hi Sir,

    Thank you for writing so regularly & giving us your valuable & unbiased opinion & views. Personally, I am an avid follower of your blog and it has helped both intellectually and financially. I wanted your views on the INR interest rate outlook going forward. Personally, I think that post the steepening of the yield curve (since July 2017) Indian Fixed Income has become quite attractive. The yields have retraced by more than 100bps since demonetisation lows. As an investor, am very inclined to move major portion of the portifolio to Fixed Income (for locking in at higher rates) vis-a-vis Equities (which are expensive). Although, I haven’t still been able to get my head around the reasons for such an upmove in INR yield curve. Yes, inflation has inched up, excess liquidity has been sucked out but don’t think this warrants a 100 bps hardening.

    Your expert views will be welcome.


    Your avid follower.


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