A nice speech by RBI Governor Subbarao.
The speech gives an excellent summary of RBI’s objectives and functions. So, in case you want to understand RBI in quick time, this speech should help. It could also help make a PPT on the same.
It is a pity that newswires focused on this para and in particular statement on inflation (which is emphasized below). This just created random volatility in markets:
In the aftermath of the crisis, our biggest challenge has been to manage the tension between the demands of growth and of inflation. Even though we recovered from the crisis ahead of most other countries, inflation too caught up with us sooner than elsewhere. The tension that we need to manage is that economic growth requires that we maintain a low interest rate regime whereas inflation management warrants that we raise interest rates. In managing this tension, we are deeply conscious that inflation is a regressive tax that hurts the poor the most as their earnings are not protected against rising prices. You will of course have noted that as part of managing our growth-inflation dynamics in the post-crisis period, the Reserve Bank has raised policy interest rates seven times since March 2010. At the same time, we are sensitive to the need for supporting growth as economic growth is a necessary condition for poverty reduction.
Newswires need to be slightly more responsible and look at the holistic picture. This has been a problem for a while and hiighlighted by Gov in his previous speech:
Sometimes, I find that the competition among the media militates against the quality of analysis. The media disseminates economic and financial news, indeed any news, at three levels. The first level is ‘news’ as ‘news’ and I can appreciate the race to be the first at this level. The second level is analysis and interpretation and the third level is ‘opinion’. It is at these latter two levels that competition to be ‘the first with it’ compromises quality. The media will probably be more effective and value adding if it allows time for digesting the news and thinks through before ‘analysis and interpretation’, and does some research before coming out with ‘opinion’. I am no expert in journalism, but as a consumer of journalism, I think my interests will be better served by more in-depth analysis and critique rather than of the ‘get up and go’ variety of opinion dissemination.
46. Second, media reporting is sometimes inaccurate, and the risk of misinformation in such cases is high. If Dr. Reddy Labs in Hyderabad projects 9 per cent earnings growth and if that is reported under a large headline of ‘Dr. Reddy projects 9 per cent growth’, even the intelligent reader can be forgiven for believing it to be Dr. Y.V. Reddy, the then RBI Governor, projecting 9 per cent GDP growth. Surely, more stringent quality control will make the media a more useful and effective ‘news intermediator’.
47. Third, as much as I can appreciate the unwavering focus of the media on news that sells, the media has a responsibility also for broadbasing its reporting. You often report what policy makers say on the sidelines of an event in broad headlines and completely ignore the event itself. This tendency, I believe, is unfair to the event organizers as well as to your broader audience who should know of the event.
48. I am also intrigued by how the media picks up a tiny segment of a speech and reports only that, and that too often out of context. For example, a few months ago, I spoke at a bankers’ conference on the implications of Basel III for the Indian banking system, and in passing I had made a comment about how the salary structure of public sector banks needs to be revisited to attract and retain talent. I was puzzled by how this bit alone got extensively reported and commented upon. Admittedly the reporting was constructive but I still feel that the larger issues of Basel III too should have made it to news and comment.
49. Finally, a brief but important comment on the role of the media during the recent crisis. It has played an effective and largely useful role in disseminating news and views, but also on occasion fuelled the frenzy. Some of the panic during the crisis could have been avoided, and at any rate contained, if the media opted for restraint instead of sensationalism.
The appeal to focus on quality has not been ignored so far…