Barclays opines measures to last till December quarter.
By R. Chandrasekaran
CHENNAI: The Reserve Bank of India has left open the time frame for reversing recent monetary measures to protect the Indian currency.
While delivering the fifth R Venkataraman Endowment Lecture on Thursday in Chennai, the RBI Governor Dr. D. Subbarao indicated that the recent measures of tightening money will remain until the Indian currency is stabilized in the foreign exchange market. He repeated the same on Friday too in Hyderabad.
The Governor said, “Reserve Bank is as anxious as everyone to roll back the cash tightening steps sooner than later. However, the measures taken will be in place until volatility in the foreign exchange market is controlled. I do not want to give any time frame in that.”
There is no denying fact that the governor and the central bank have sacrificed growth to defend the Indian currency. Subbarao also defended the efforts by saying that inflation cannot be controlled in the absence of growth sacrifice. However, both sees the measures as short term one without specifying the time frame for the roll back.
Meanwhile, Barclays reportedly sees the possibility of the RBI rolling back its recent measures in the December quarter since any efforts to reverse them in the current juncture will tantamount to the lack of wiliness or seriousness in addressing the issues.
The brokerage said “Having adopted these measures, the RBI will likely find it difficult to quickly reverse them, as that could be seen as a lack of resolve on the part of the central bank to support the currency and could be an additional risk for the INR( Indian rupee).”
To contact the author, email to rchandrasekaran@americanbazaaronline.com