Coinciding with the view that the economic slowdown was cyclical, the RBA's recent analysis described the three-quarter declines as a downward phase, but not as a change in direction.
Two mixed months have passed since the first RND government budget. The budget had a sharp vision in terms of taxing the wealthy. He has delighted markets by forcing the government to borrow from abroad. But it was rude to put restrictions on foreign direct investment.
The economy has been losing the momentum of growth since the last quarter of 2018. In the first quarter of 2019 (fourth quarter of fiscal year 19), GDP growth reached 5.8%, well below the 7% + rate of the previous four years.
I thought what was needed was not a temporary boost to demand, but a strategy for long-term growth. The Reserve Bank of India has just concluded its analysis, which described the fall of three quarters as the downward phase of the cycle, but not as a change in direction. On Friday afternoon, the figures for the second quarter of the 2019 calendar (first quarter of fiscal 20) amounted to 5%.
The government has realized that its budget may have given the wrong signals. She blamed the confusing budget message on the anti-growth and anti-foreign ideology of the majority party. These items appear to have been verified and Nirmala Sitharaman was running ads similar to supplementary budget extensions. This may be the best way for a new finance minister, who feels on his way to the hard job after Aaron Jaitley, who had remarkable control over economic policy with the enthusiastic support of the prime minister.
This was just one of the week clashes. Earlier this week, it was confirmed that RBI would be able to transfer 1.76 trillion rupees (about $ 250 million) from dividend revenue, as well as withdraw its reserves. At the end of last year, there was an open debate between the central bank hierarchy and the Ministry of Finance about what the latter thought was excessive wisdom by the Reserve Bank of India. The RBA's capital ratio is believed to be much higher than Delhi needs, while its technical experts were thinking about it. The governor, Orgit Patel, and his deputy, Feral Acharya, both left discreetly.
The Jalan Bimal Commission reported earlier this week and recommended a safe reduction. Then, RBI announced the conversion, which will ease the financial pressure on the government. This has raised questions about the independence of the central bank. The idea that the central bank should be independent of the elected executive seems to have become a religious doctrine. But, it is a fairly recent development. The United Kingdom granted independence to the Bank of England only with the arrival of Gordon Brown as the new chancellor in 1997, and only with regard to setting the interest rate.
India has never had such a tradition, and the 1935 legislation establishing the RBI requires you to follow the advice of the Treasury. Conservatives were appointed from the cadre of retired finance ministers and carried out the task of walking faithfully. It was the globalization and ambition of the bunker that prompted the government of Manmohan Singh to invite a prominent scholar, Dr Raghuram Rajan, to be governor, noting that India would enter the Association of Major Economic Powers. Rajan gained clear independence but resigned from his second term, when the elected government changed its colour. His successor, Dr Orget Patel, a Yale student, also gained his independence.
Teachers disagreed in Delhi, and Dr Patil politely excused himself and resigned. The situation returned to normal, and Shaktikanta Das, the new governor, was very active in cutting interest rates while keeping inflation on the way. The cooperative attitude will continue. The guide is now from the tax authorities in Delhi, on how to use RBI gift. It would make sense if the funds were used to recapitalize the preparatory nationalized banks, hopefully, for sale. The government could also use unexpected gains to withdraw debt, which would encourage bond markets.
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