Saturday, January 3, 2009

Return of animal spirits

Finally, the government has come out with a coordinated monetary and fiscal policy response to a slowing Indian economy.

The Reserve Bank of India has slashed the cash reserve ratio from 5.5% to 5% and has also reduced the repo rate to 5.5% from 6.5%. At the same time, the government has announced a second stimulus package.

Will it work? It just might. It is well known that pessimism, more than anything else, sucked the life out of markets. The problem, so far, was that government responses were only of the half-a-limb kind: Either too much emphasis was paid on monetary policy or stand-alone, badly designed, fiscal packages were put out.
Friday’s announcement is different.
To read more, please, visit - livemint.com

Related Stories:

1) RBI cuts key rates to stimulate economy

2) Economists see robust growth in FY09

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