Economy, Foreign Exchange, and Bonds – A Balancing Act
(The following article appeared in MoneyControl.com per link below: https://www.moneycontrol.com/news/opinion/economy-foreign-exchange-and-bonds-a-balancing-act-6598181.html ) Economy, Foreign Exchange, and Bonds – A Balancing Act Rarely do policymakers ever have it easy. Even so, the particular context that RBI now faces is perhaps trickier than usual. In this note we will consider the context around inflation and the real economy, and then explore possible options for the RBI around monetary policy, foreign exchange intervention, and bond markets. An Uneven Recovery India’s economic recovery from Covid-19 has been brisk, but uneven. India’s vaccination drive is gathering steam, and we will hopefully avoid a Covid-19 second wave. Consumption has recovered and sustained – witness robust GST collections for the past five months - even before all services fully resume. Government spending continues. With all this, listed companies have registered excellen...