Article;
Retail inflation as new policy benchmark a good-idea.
Comment;
We should thank the central bank that it has not chosen 0%
inflation or complete price-stability as the objective. The central bank would
target 4% +/- 2% CPI... much liberal... not very hawkish…It (the central bank)
has tried to make the monetary policy more predictable... The RBI has made a
complete time-table for years to bring inflation close to the target... a very
good move... but let us see how it is accomplished... If that is done by
increasing interest rates then we will go through a downward spiral, falling
demand and prices until inflation comes close to target 2-6%... or it can be
done by fostering supply, especially food items... The Indian story is more
about inflation and supply side bottlenecks and as far as demand is concerned
the government has pumped too much money through loose fiscal policy... which
gave wages and income a boost… demand is outpacing supply due to bad policy in
retailing even when food and fuel prices globally are much calm... Bad
Government policy is responsible for high food inflation…
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