InvestorQ : With low inflation, do you see the RBI putting off any plans for rate hikes or reducing liquidity?
Rutuja Nigam made post

With low inflation, do you see the RBI putting off any plans for rate hikes or reducing liquidity?

Answer
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2 months ago
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It could actually be the other way round and let me explain what I am saying. IIP for August was much better than expected. In fact, on YOY basis, all 3 IIP components of mining, electricity and manufacturing have grown over Aug-19 figure. This indicates that the IIP is growing despite the base effect waning to almost zero by September. That shows growth is coming from sustainable sources and that means boosting growth is not a real worry.

The focus will there now shift to inflation control. RBI is now going to adopt a modified approach to liquidity and rates. If IIP is growing even without the base effect, the next big challenge for the central bank is high inflation. RBI can no longer say that they are keeping rates low to boost growth. That means, RBI will be driven more by inflation concerns than by growth concerns. After all, this return to growth has come at the cost of higher inflation.

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