Friday, July 27, 2007

Monetary Policy in India; Review on July 31

RBI will have a review on it's monetary policy on 31st July. I have been grappling with concept related questions and issues on interest rates, exchange rates, capital account convertibility. I guess that the monetary policy review due on 31st July will have some answers.

What are the questions that baffle me? They are:
* Will we have a soft interest regime now when we have controlled inflation?
* Is the appreciating Rupee good for the consumer? I hear that it is bad for the export oriented industry, especially the IT industry.
* Does the appreciating Rupee make India more competetive? Or is it that that now when India is becoming more competetive, the Rupee will appreciate regardless of whatever the RBI or the Government does?
* In other words, should the RBI intervene or let the market forces control exchange rates?

India Knowledge Wharton has a very nice article on the issue. Am keenly watching Ajay Shah's Blog for more insights.

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