RBI may again hike rates, Rajan to go ahead with squeezing the economy’s neck trying to force it to loosen its grip and let go of the inflation. While he’s doing the best within his capacity, the onus is on the government to ease supply side constraints and cut unnecessary spendings and subsidies.
However, a 0.25 bps hike may stun the economy – slowly unwinding its wrath, and also further lowering the IIP (knocked down by 1.8% already). Even as Dr. Rajan consistently hiked rates since he took charge, consumer price inflation did hit a 9 month high.
No good signs on the horizon as the government shifts its focus to the elections just like Sauron’s eye shifting its gaze from Frodo on Mount Doom to the armies of men at the gates of Mordor. It didn’t end well.