The author has very strongly argued against the major recommendation of the Committee that"monetary policy should move away from its narrow focus on inflation towards a multiple target-multiple instrument approach without swerving from a commitment to price stability over the medium term.”This recommendation is okay in advanced economies where there are perfect market Conditions, enlightened people and standards of living are very high with low cost of living.Ours is an imperfect market where demand for goods and services are not / seldom matched by supply and there are, apart from economic policy inefficiencies,there are issues of lack of Governance and accountability. Frauds generate black money, Corruption increases circulation of black money and demand for products and services and greed dictates the pricing of products and services in the market. These need to be tackled first on a war footing and financial literacy which is virtually absent even among the literacy class needs to be considerably improved.The Committee should have thorough understanding of the socio-econo-political conditions of our economy and then come out with suitable recommendations on Monetary policy reforms.The food products production, storage, marketing and distribution is in total disarray and the manufacturing side is still worse with lack of policy support on land, labour, law ,capital formation and power supply.. As it is, the transmission of monetary policy has not been as effective as desired by the Monetary authorities and this cannot be ignored before new reforms are thought of.
Dr.T.V.Gopalakrishnan
This comment in ET is in response to an article 'Junk the Urjit Patel report' that appeared in ET dated 5/2/14)
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