There has rarely been a more apposite hour for Duvvuri Subbarao to do more than the due.
Rating agency Standard & Poor’s said on Friday it will be difficult for the government to meet revenue projections due to the economic slowdown, which, it said, risks India’s credit rating.
Now that’s one more reason why the RBI must change its discourse and plump for growth.
It need not fear stoking core inflation because manufacturing demand and pricing power are faraway specks today. The output gap has been running negative for some time now, so the headroom in capacity utilisation is reassuring in the context.
India is also facing a simmering unemployment and unemployability crisis.
Growth and investments are crucial antidotes and lower interest rates encourage both, notwithstanding Mint Road’s scepticism on the thesis.
Sure, our consumer price inflation is the highest in the world, but the RBI knows very well it can’t do anything about it.
So which is the better existential crisis? A population with few jobs and little money to buy costly essentials or the one that has a modicum of both and so can duke it out?
On its part, the central government is correcting course by brutally curbing expenditure.
It’s up to Mint Road now to deliver the much-needed stimulus.
Go for a 50 bps cut, Guv. Split it if you will, between Tuesday and the May review.
25 bps will leave you behind the curve.