Fearful Symmetry sees India doing self-harm

In May this chronicle was devoted to the parlous state of Indianexternal financing, while followed on from an April edition centred on the RBI. Unfortunately Fearful Symmetry is now compelled to return to monetary policy, with the RBI confounding most observers by leaving its policy settings unchanged at the mid quarter review onthe 18th of June.

This is how the RBI justified the decision to withhold monetaryeasing from the weakening economy, blow by (flailing) blow. First,they highlighted how bad things are on the growth front at home and abroad:

“Since the Reserve Bank’s Annual Policy statement in April, global macroeconomic and financial conditions have deteriorated. At the same time, the domestic macroeconomic situation too raisesseveral deepening concerns.

Second, they return to their framework that there are threshold levels of inflation that are toxic for the realeconomy, which require a hawkish approach”

While growth … has moderated significantly, headline inflation remains above levelsconsistent with sustainable growth.” Fearful Symmetry will address this theoretical debate overleaf.

Er 20120621 Bull Fearful Symmetry June

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.