We trust in Ram.

"India's economy gathered further pace in October as resurgent festive spending, firmer urban consumption, continued rural demand and the boost from recent GST rate reductions helped lift activity despite persistent external headwinds, the Reserve Bank of India (RBI) said." "Food prices acted as the single biggest drag on headline CPI (consumer price index)," and "Core inflation - excluding food and fuel - moderated to 4.3% in October from 4.4% in September." ET. "India's annual retail inflation slowed to a record low of 0.25% in October from a revised 1.44% in September, government data showed." Reuters. "Experts said this boosted chances of an interest rate cut at the December monetary policy meeting," but "With second-quarter GDP growth estimated at over 7%, the central bank must determine whether easing policy risks overstimulating an already healthy economy." ET. Daniel Moss thinks, "Fixing this will require more than the standard prescription - simply cutting interest rates. The promise of an aggressive and sustained easing is needed, one that brings its own share of challenges." "The rupee is the worst-performing Asian currency this year against the dollar and, on 21 Nov, it fell to a record low." Gold prices "drove up personal care and effects inflation to 57.8%; excluding gold, headline CPI turned negative to -0.57% y-on-y." Reduction in GST rates resulted in moderating inflation by 85 basis points (bps), when estimates suggested a moderation of 65-75 bps, said SBI Research. "Gold is an asset, not a biscuit," and should be removed from the CPI basket, wrote Monica Halan. "When inflation is too low, it is an indicator of weak demand. This impacts the firms' desire to produce more and when firms cut production wages suffer."Also, the government collects tax on nominal Gross Domestic Product (GDP) and when inflation is too low tax collections falls." So the RBI must cut rates. HT. The problem is that demand is very strong. "India's sweeping consumption tax cut drove shoppers to splurge," so that "Sales across the country topped Rs 6 trillion ($67.6 billion), with items like jewelry, electronic, apparels. furnishing and sweets most in demand." ET. "The economy will be powered in the third quarter (Sept-Dec) by a booming marriage season," and "A Bank of Baroda study pegged consumption related to festivals, including marriages, at Rs 12-14 trillion in the quarter. Wedding expenditure alone is estimated at Rs 4.5-5 trillion." ET. So, should the RBI slash the cost of borrowing? An editorial in the Mint disagrees. "High inflation favors borrowers, as it slowly reduces the value of what must be paid." But price stability "shields our savings and relieves the hard-up of their struggle to make ends meet." Also, as the purchasing power of the rupee declines at a steady modest rate, it facilitates long-range investments in the local currency. So, the RBI should resist the temptation to reduce its policy rates unless there is a possibility of deflation. The problem with that is that the government is the biggest borrower and the RBI is but a branch of the government (rbi.org.in). Perhaps, the rupee will be the deciding factor as the RBI had to support it yesterday after it closed at an all-time low of 89.49 to the dollar on Friday, 21 November. Reuters. Will the rupee hold up, or collapse? "In God we trust" is the official motto of the US. wikipedia. An unofficial one for India is 'Ram Bharose' (trust in Ram). Is it time to panic? God help us.