Dr.T.V.Gopalakrishnan
This rise in inflation index is a clear indication that it is
interest rate insensitive and RBI cannot do anything to contain it. The
measures have to come from Central and State Governments after
diagnosing the real cause for persisting inflation.Monsoon has blessed
the nation and agricultural production seems to have augmented. Even then there are no signs of inflation coming down.The
causes for persisting inflation can be found in increased circulation of
black money, high level of corruption at various levels of procurement,
storage, marketing and distribution. Further,the frequent increases of
fuel costs which have a direct bearing on movement of essential goods
also cause high inflation. Various types of taxes and greedy pricing of
goods under the shelter that 'no one can or no one is there to question
come what may' can cause high inflation.Since this problem of inflation
has been persisting for a few years, it needs to be seriously approached
coordinating the activities of all agencies involved in food products
production and their logical distribution cutting all undesirable costs
in between. No doubt the Local Boards of the Reserve Bank which is not
as effective as it can in their functioning can do a lot in coordinating
the state level functionaries connected with agricultural production,
storage, marketing and distribution. The NABARD also has to revisit its
role in the area of agriculture and rural development and bring out some
solid policy changes to tackle inflation problem from other than hiking
Policy rates. Time to have an out of box thinking on the subject as
there is neither growth nor price stability in the economy as of now. It
cannot go on like this for ever.RBI's traditional approach to tame inflation will not be of much use.
(This comment is in response to the news report'All eyes on RBI as inflation hits 14-month high, food prices hurt' that appeared in Business Standard dated 16/12/13).
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