RBI and Inflation

RBI trained its gun on inflation and the Governor incurred the wrath of the Government and Dr Subbarao had to bear all the insults from the Government for his anti inflation stance pursued during a major part of his stint in RBI. Inflation is caused due to both supply and demand factors.While supply has been adversely affected due to low production and productivity, lack of storage, transportation and marketing facilities, high costs of inputs due to increased cost of fuel fertilizers and transportation etc,, demand is caused due to excessive income generated by wrong taxation policies skewed in favour of the rich, corruption and black money. The data in respect of employment and income earned by many do not seem to be reflecting in the statistics used to arrive at the demand potential is also a fact leading to wrong policies. It is for the Government and not for the RBI to seriously ponder over the whole issue of inflation control at this critical juncture where the failure of the government is predominant. RBI's balance sheet expansion is also a direct reflection of Government"s poor finances.

Dr.T.V.Gopalakrishnan

(This comment in response to the article RBI should train guns on inflation appeared in Hindu Business line dated 16/9/13).