Monetary policy Why not have a different approach to contain Inflation.
Dear Sir,
Apropos your editorial RBI’s not too much behind the curve, (ET 7 Dec) the fact remains that RBI has done its best to retain the policy rates unchanged and maintain its accommodative monetary policy neutral, despite the continued persistence of high food inflation and not so encouraging economic growth as targeted.Two members of the MPC had a different view on policy rates is itself an indication that seeing the historical trend in containing the inflation which is beyond the fiscal and monetary measures a unanimous view on Price Stability and economic growth cannot be sensible/ possible / practicable. However, as a matter of great relief RBI cut the CRR rate by 50 basis points in two tranches, to neutralise its neutral policy stance and provide some comforts to banks and economy by easing the availability of liquidity to expand credit to the needy segments of the economy.Even though CRR cut itself is inflationary ,the overall approach of RBI seems to be obviously limited to contain the food inflation which remains defiant and unresolvable easily by monetary policy alone. It is time to seriously introspect by policy makers to identify the causes of continued persistence of food inflation year after year which requires it to be tackled diligently, politically, fiscally, administratively and monetarily.
T V Gopalakrishnan
Bengaluru
( Letter sent to ET on 7th Dec )
1 comment:
The point that the administration is missing, is urgency. The tools that have worked for decades, might have become less effective given the pace at which modern economy works. Leveraging standard approaches given the current inflation might be a case of too little too late.
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