Government should cut PETROL PRICES, RBI should cut CRR, RATES NOW!

Petrol Price CutI am somewhat displeased with some of the moves of the current Govt and RBI made in 2008. The sharp hasty hikes in CRR made in 2008 have hurt India Inc. Yes- you will say that now it is very easy to make comments when we actually see inflation under control but those times were different - each week saw a record high number for inflation- Inflation over 12% was something ridiculous. No doubt. But there were alternatives to tackling inflation. Read for example this rediff article dated Jan 2008- It makes an interesting suggestion - reserve requirements for capital inflows - as an alternative to CRR hikes. Why wasn't this alternative strategy not considered?

The Recession is growing worse. Dont be fooled by Sensex rising above 9K into believing that the outlook has gotten better. In such a scenario- I think it makes sense for RBI to come up with a stimulus move in the form of CRR and/ or repo rate cuts. Also why hasn't the Government cut petrol prices yet? Crude oil is currently below $45 per barrel and it is indeed possible for the Govt to make yet another price cut. It is very likely that the current government - like any other government or party mind you - will try to time this move in order to benefit from the approaching elections. That is bad news from us, because we are not interesting in timing or populist moves - we want price cuts now! the sooner the better.

There have been speculations that the Govt. might announce a Rs. 4 to 5 cut in petrol (per litre) and around Rs. 2 in diesel. But now confirmed news yet. Lets hope the move comes soon.

Jan 28, 2009

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