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Thursday, June 26, 2008

Recent RBI tightening

I wrote an article Useful but ineffectual in Financial Express today, on the recent RBI tightening.


  1. Ajay you claim that a 10% appreciation could lead to a 2% fall in inflation. That estimate seems to be on the higher side. Empirical studies (even by RBI) that I have seen suggest a 1% change in inflation for 10% change in currency. Can you elaborate upon your assertion? Thanks.

  2. blogger misses 2 points..
    good deal of reserves are not really reserves and is susceptible to flight as FIIs flee
    a sharp rise in rupee will not only devastate the only industry (IT,BPO) that has been the bellweather for indian growth for the last 5 yrs..
    ANyhoo, the time has arrived where last 5 yrs of credit (hence debt) orgy & loose monetary policy worldwide is beginning to bite everywhere..
    I will predict Rupee to fall to ~60 against dollar in ~2 yrs..
    Rampant indian inflation will reduce indian growth to ~4% in the next decade

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