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RBI could be experimental in monetary policy

RBI could be experimental in monetary policy

A week before the monetary policy by RBI.Today, World Bank Chief Economist Mr. Kaushik Basu called for an “experimental” approach to the interest rate changing process. “Monetary policy is a very cloudy area and I have felt that we should be more experimental. RBI Governor Mr. Raghuram Ji Rajan, who is considered an inflation hawk, will declare the first bi-monthly monetary policy review of the new fiscal on April 5th.

The policy comes amidst inflation remaining under control and the Budget sticking to the previously set fiscal roadmap.But It comes within weeks of govt slashing small savings rates by up to 60 bps, which will contribute to banks bring down deposit as well as lending rates.

Mr. Basu was addressing an Asia Society event organised to discuss his latest book ‘An Economist in the Real World: The art of policymaking in India’ that deals with his days in the Mr. Manmohan Singh government as the chief economic advisor.

“In my opinion RBI should have been a bit more liberal & not respond to inflation by increasing interest rate the way we traditionally do,” he told, arguing that no one has a sure answer to most macroeconomic & monetary policies.

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