.......At best, monetary policy may have a salutary impact on core inflation – that is, price changes in commodities, chiefly manufactures that are free from volatile elements, food and fuel groups. But, if the headline inflation stays at an elevated level over an extended period of time, as is now the case, monetary measures alone may not be enough. Both the government and the central bank may have to work in tandem to quell the price fever. At home, prudent budgetary policy and growth-promoting strategies can go a long way in lowering the inflation rate. As Chester Bowles, the famous American politician who had served as ambassador to India, observed, “Production is the only answer to inflation”. This is the role of government and then monetary policy can play a contributory role. But, as of now, the RBI is left holding the fort while the Centre dithers. No wonder then that inflation appears to be well entrenched in the economy.
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