Manage Inflation Differently         

Apropos the news item Food prices have nothing to do with Managing Inflation,(ET 15/11/24) the Commerce Minister's call  to  the RBI to Cut rates saying that it is an absolutely flawed theory to consider food inflation while deciding policy rates, makes a lot of sense in Indian context. The food inflation inter alia  is basically man-made taking advantage of political uncertainties, nature's  failure, ineffective governance , lack of financial discipline particularly at state levels and play of dirty politics to exploit the situation gambling on price sensitive commodities adding to inflationary pressures. A strong administration and prudent management of Fiscal Areas of the Central and State governments can to a great extent manage and contain the food inflation with sensible  supportive policy changes  in the production, export, import, procurement, storage, and smooth distribution of agro based commodities. Perhaps a very closely coordinated approach  involving  NABARD , Local Boards of RBI, Commercial Banks, RRBS , Cooperative banks  and Agricultural departments of both Central and State Governments can definitely play a key role in containing the food inflation. In this context, even setting up an Inflation Neutralisation and Stabilisation Fund  under the auspices of RBI  can be seriously thought of to tackle food inflation particularly vegetables like Onion , Potato and Tomato. The food inflation  which is a creation of administrative failures basically cannot be allowed to distort the twin objectives of Monetary policy  Viz Economic Growth and  Price Stability and make the dream of the PM to make the  nation to be an advanced economy by 2047 unrealistic.WE cannot afford to lose the battle for want of a nail .

  

            

T.V.Gopalakrishnan