.............Though
he has not intervened to stem the slide directly, he had to intervene
by raising interest rates. The measure appears half-hearted. He wanted
rates to rise, but did not say so. A reasonable guess here could be that
he did not touch the repo rate because the government persuaded him not
to do so since it would be seen as a reversal. It is hard to believe
that someone without conviction could bump up interest rates by 300
basis points in the market, but did not want to say so. The absence of
clear communication is a double whammy. It has not helped the rupee, but
damaged the fixed-income market. Subbarao said, “There will be
consequences for this. There will be pain in the economy. Somebody will
have to bear the cost for this. Those costs are inevitable and
unavoidable.” Many of his actions may not have reflected his thoughts,
but most of his thoughts reflected the reality. The 2010 speech shows
that unlike Abhimanyu who was trapped in the chakra vyuha, Subbarao knew
what he was getting into.
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