....even as the Reserve Bank of India (RBI) nuances monetary policy to maintain the growth-inflation balance, manufacturing is likely to remain flat. The global contagion and the falling value of the rupee limit the RBI’s options to cut interest rates. As this newspaper has rightly pointed out, the solution to high inflation and low growth – stagflation – lies squarely with the government. RBI Governor D. Subbarao has, again rightly, identified the problem as supply-side – lack of reforms discouraging productive investment. Fiscal profligacy has fuelled inflation. Without fundamental economic reforms – cutting fuel subsidies, fast-forwarding infrastructure projects and reducing the fiscal deficit – no amount of monetary policy tinkering will tame inflation or spur GDP growth......
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