RBI shifted its focus on FX management with a hawkish hold tone; will it work?
· · Both the RBI and the govt are treating the ailing economy symptomatically with cyclical policy reforms; it needs structural reforms for structural issues. · Due to higher real rates (compared to super core CPI), higher cost of borrowing, and higher taxation, including energy costs for decades, along with extreme regulations & corruption, India has to reset from politics to policies. · Looking ahead, the RBI may be on hold with a hawkish stance (wait & watch) till at least December '26. · USDINR may appreciate 5-10% CAGR ‘naturally’ over the next ten years; this, along with potentially higher external debts (public + private), may cause India to face FX vulnerability for its domestic, savvy, import-oriented economy. · Muted supercore inflation for the last few...