TOO LITTLE, although not too late

The official economic cognoscenti is patting itself on the back - with the delirious momentum of the international financial crisis going on, at least our policy-makers took some decisions. No more can people fault them for slow or even non-existent reactions. They woke up, smelt the smoke, and took rapid measures to douse the fire. Thus RBI cut the repo rate, slashed CRR and lowered SLR, flushing Rs 100000 crores into the system. Great.
A great article recently pointed out that while some commentators were felicitating previous RBI governor Reddy for his cautious approach, others were talking about the reforms that India's financial system still needs. The latter seem keen to fix on a conventional inflation-management regime for the central bank, and let the rupee take its own course. Both approaches are flawed. A cautious approach may protect us from financial ills elsewhere in the world - and it may be noted that such crises arise once every decade or so in different parts of the world - but it ultimately rebounds on the entire economy as savings and investments are not properly matched, and financial inclusion and integration with the world remain distant.
At the same time, India's central bank cannot remain a single-agenda manager and control only inflation. This is not a perfect world. India is a developing country, and conventional monetary mechanics of developed economies should not be ritually applied here. Rupee management is a must, considering that so much of India's competitiveness depends on it. If China had really allowed its currency to float - I mean, less than 10% in three years! does anybody still think it is a float? - it would not be vying for the post of top exporter. The damage the yuan has done over the past ten years will only be analysed in economic history books. Meanwhile, America is bankrupt, other developing economies are happy enough to export low value-added items to China, and everyone is worried about the future.
There is immense room for further interest rate cuts, if only to make Indian industry more competitive. It might help restore some demand, and prevent job loss. RBI needs to take drastic measures to deal with the drastic situation.