Monetary Policy and vegetable Prices

This refers to your edit Dr Subbarao's desperation (business Line, January 19). As rightly pointed out, it would be an extreme act of faith to link vegetable prices -which are driving up the inflation rate -to monetary policy. The present atmosphere in the economy does not warrant any drastic monetary policy which can upset the growth trajectory. The measures can be in the form of controlling speculative advances in the rural semi urban and urban branches where hoarding and speculative activities with bank funds are suspect. Some specific higher margin requiremwnts and higher interest rates on advances against some food items and intensive supervision of these advances by the controlling offices can take care of these temporary spurt in prices. Banks should also be encouraged to step up advances to augment production of vegetables and commododities which influence food prices. Incentives to ease transporttation of vegetables and improve storage facilities through bank finance can also be thought of. There is also a need to spread the message of monetary policy among the various officials at ground level which itself will act as a measure to prevent wrong financing and encourage anti social activities. Dr.T.V.Gopalakrishnan