A pause more likely...

CPI inflation data was out on Monday and showed a marginal decline… But inflation in cereals is 12.14% and has seen an uptick of 2.15%... It is not moderating; an increase even when the government is sitting on a lot of food-grains, even for exports… The government officials see APMC Act major roadblock in the dissemination of food-grains. It is mainly a supply-side problem which only the government can handle but showing itself too busy… But what could be more important than food, not of a person, but of the whole country which is aggravated by the RBI’s stance to hold interest rates high, and investment and income, too, is not growing too fast to pace with rising inflation. It is a two-way detrimental to economic growth… First, higher prices (and low real wage and income) and second a lower income due to higher interest rate. In short lower demand for our market, less growth… The government backed growth so hard during recession that inflation touched twenty-percent and failed to roll back the measures taken to avert the down turn which kept reinforcing demand even in the face of infrastructure, especially roads, and supply-side constraints. Physical infrastructure will take time to cover but releasing food-grains from the government buffer is approachable even in the short-run. We need to show will-power. The RBI embarked on a rate hike cycle bringing inflation near to 10% but inflation is sticky around that level since 2004 which now almost have become generalized that economy will push prices 10%, if the economy grows 8%... A pause in the next RBI meet is likely…