Can you imagine, the Guv'nor of the Reserve Bank sitting at a tea shop in Mumbai, watching TV and eating some pav bhaji with the owner. The Chai-wallah is keen to tell the Guv'nor what is wrong with the economy. "You can see, the jail-bharao protest against the petrol price hike... Here in India we have put up the petrol price when worldwide it has come down. We seem to be doing things upside down! Secondly, people may wish to buy a car or a scooter... but the interest rates are too high. The banks say the repo rate is too high....If I wish to send some money to my children who are studying in New York, it is costing me more rupees...People are not too keen on the stock market because it doesn't seem to hold...If there is no money for growth, no interest rate cut, the economy will stagnate and we will enter a recession.... What good will that do, tell me, Guv'nor?"
The Guv'nor ponders these questions, sips his tea, finishes his pav bhaji and pours another cup of tea.
This Chai-wallah has a point. The repo rate ought to be down.
"Waht do you think Fed Chairman Bernanke would do in such a situation, eh? If he had such a luxury, he would bloody well cut the interest rate, wouldn't he?" the Chai-wallah tries to vent his anger with some humour.
The Guv'nor adjusts his cravat, ponders the question "50 basis points, 100? How much?"
"Sir, next month we won't have the luxury of asking this question if the Industrial figures fall again."
This jolts the Guv'nor. The TV journalist says foreign funds are not too keen on India's Sensex or Nifty, not with the economic uncertainity. And the Rupee has fallen to an all-time low of 57 to the Dollar.
"Between you and me sir, it is time for swift action. Now excuse me, I must get back to my till."
Hopefully, the Guv'nor will make a pragmattic decision and lower the rate, perhaps in unison with the other Bric countries?