Confusions galore in India’s financial markets

Mint edit piece y’day said there is no finance minister in the country. This has become a big problem as suddenly we have been flooded by comments from various Indian policymakers and politicians.

  • On Jan 20 Planning Commission chief said India had more room for monetary and fiscal policy
  • On Jan 21, he said no more stimulus for 2008-09
  • On Jan 21, another news item says PM’s apex economic committee (which includes Plan Com chief) are readying Stimulus III package

These are news items and can still be clarified (however, unlike SEBI no one issues any clarifications) . On various newswires the confusion is worse. We have comments after comments from various key people often with conflicting views. This confuses the stance of financial markets.

For instance today a leading policymaker expressed different views to two seperate newswires. On one he said rate cuts are desirable (indicating rate cuts could come in monetary policy) to other he said though desirable, he didn’t expect it on Tuesday’s monetary policy. He also adds that he has changed his view on central bank monetary policy stance and RBI is an independent body and he is not involved.

Likewise, comments are flowing thick and thin from policymakers each trying to sooth his audience. It is becoming a nightmare. This is all the more evident in case of government debt markets where comments on inflation, govt deficit has an immediate impact.

The policy statements are adding their own volatility premium to the already high volatility.

One Response to “Confusions galore in India’s financial markets”

  1. Forex Informed Says:

    […] Confusions galore in India’s financial markets « Mostly Economics […]

Leave a Reply to Forex Informed Cancel reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: