09-01-2008, 10:03 PM
<b>India Unexpectedly Appoints Subbarao as Bank Governor</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Subbarao, who was an economic adviser to Prime Minister Manmohan Singh before he became the top bureaucrat in the finance ministry, is an engineering graduate from the elite Indian Institute of Technology. He joined the civil service and was later deputed to the World Bank, where he was the lead economist between 1999 and 2004 on issue of public finance in Africa and East Asia.
Subbarao has a masters in Economics from Ohio State University and was a Humphrey Fellow at the Massachussetts Institute of Technology. He holds a doctorate from Andhra University.
<b>Soviet-Style</b>
India practices Soviet-style price controls, subsidizing oil and ordering cement and steel companies to keep prices unchanged even as costs go up globally.
That complicates monetary policy, because it makes the economy vulnerable to unpredictable price shocks, as happened in June when the government was forced to cut fuel subsidies to protect refiners from going bankrupt after oil prices surged.
India's inflation rate jumped to more than 12 percent from 8.75 percent in three months, forcing Reddy to raise the central bank's key repurchase rate by 125 basis points to 9 percent.
Cumulatively, Reddy has increased the repurchase rate by 300 basis points since October 2004. He also raised the cash reserve ratio, or the proportion of funds that lenders need to set aside as reserves, by 400 basis points to 9 percent, since December 2006 to check money supply from stoking inflation.
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One stooge appoints his another buddy
Subbarao has a masters in Economics from Ohio State University and was a Humphrey Fellow at the Massachussetts Institute of Technology. He holds a doctorate from Andhra University.
<b>Soviet-Style</b>
India practices Soviet-style price controls, subsidizing oil and ordering cement and steel companies to keep prices unchanged even as costs go up globally.
That complicates monetary policy, because it makes the economy vulnerable to unpredictable price shocks, as happened in June when the government was forced to cut fuel subsidies to protect refiners from going bankrupt after oil prices surged.
India's inflation rate jumped to more than 12 percent from 8.75 percent in three months, forcing Reddy to raise the central bank's key repurchase rate by 125 basis points to 9 percent.
Cumulatively, Reddy has increased the repurchase rate by 300 basis points since October 2004. He also raised the cash reserve ratio, or the proportion of funds that lenders need to set aside as reserves, by 400 basis points to 9 percent, since December 2006 to check money supply from stoking inflation.
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One stooge appoints his another buddy