.... Unlike in 2010, central banks are not in the initial stages of tightening monetary policy but have instead started to loosen their purse strings. That’s a huge difference. Reserve Bank of India (RBI) deputy governor Subir Gokarn can take the credit of being one of the few who predicted this rally, when in a speech in early November 2011, he said that if a sustainable solution to the European sovereign debt problem emerged soon that would lead to global portfolio rebalancing among investors, which would mean more capital flows to India, which would result in less pressure on the rupee and, therefore, lower inflation, which would allow the interest rate cycle to turn, thus improving growth. Of course, it’s not as simple as that.....
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