Magazine : 
The Indian Economy Needs A Dovish Raghuram Rajan
The federal funds rate futures market is pricing in a June/September rate hike by Janet Yellen. But disappointing retail sales data and the lack of wage growth in the US labour market may just push this tightening event into 2016. Notable market voices such as CLSA’s Chris Wood and Morgan Stanley’s chief US economist Ellen Zenter belong in this camp.
If it plays out like this, we should expect gradual INR appreciation. This would support the interest rate easing cycle and if Rajan eases faster than market consensus, a sharp fall in the Rupee’s value against the USD should not be one of his major concerns.
Need 100-125 basis points of easing till next budget
We have seen the bank nifty sell off and underperform the broader market even after two earlier than expected rate cuts. Most of the public sector banks have been hammered and are trading well below their adjusted price to book value. The RBI governor has to do more to revive credit growth and kick start our financial system.
Structural reform and fiscal easing are of course crucial, but we are living in an era where monetary policy is driving global economic activity. Rajan must also take cue from the developed market central bankers.
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