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Brookings India Director of Research and former Deputy Governor of the RBI, Subir Gokarn, answers questions on the RBI Monetary Policy review in Business Standard.
Read the full transcript of the webchat here.
Is the Reserve Bank of India immune to political and India Inc’s pressure for rate cuts as Governor Raghuram Rajan is suggesting?
The way to look at it is: suppose neither the business community nor people in government had said anything about what the RBI should do, would Dr. Rajan have done exactly the same thing? If so, then you could answer in the positive. I believe that this is the case.
Should the RBI should have cut rates?
I think it was the right thing to do. Monetary policy decisions should be predominantly driven by domestic inflation and growth considerations. What the Fed does may have an impact on financial stability (although I think India is relatively insulated because of the low CAD) and other instruments are available to manage this.