The fact that both Government and RBI are really seized of the concern of inflation and steps initiated by them have started yielding some positive signs on inflation and inflation expectations, cannot be ignored by the RBI while deciding the monetary policy at this crucial stage when the efforts of the Government to give a boost to the confidence level in the economy are catching on well and needing solid support from monetary policy angle. Further, the monsoon seems to be favourable and other trends which can cause inflation except perhaps the price of oil are moving in favourable direction. Industrial production has been picking up well and agricultural activities have been going strong all over the country with improved monsoon. This is the ideal opportune moment for RBI to give a signal that RBI favours soft rates to keep the growth momentum shown in industry and elsewhere. Inflation is definitely not because of monetary policy is a known fact and RBI can definitely be bold in reducing the policy rates.
Dr.T.V.Gopalakrishnan
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