..........Raghuram Rajan, who seems to be looking at the Managing Directorship of the IMF as his next job, claims that inflation hurts the poor. Indeed it does, but not as harshly as unemployment. As economists less wedded to Chicago School monetarist dogma than the RBI Governor have pointed out, a somewhat higher rate of inflation is more than bearable if there is double digit growth, whereas to a person who is lacking work, even constant prices are unbearable. Although the textbooks that he is following so blindly may not agree, in the real world, food inflation is the result of supply and distribution, hence higher interest rates are ineffective in curbing them. And in a context where inflation ........
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247Reserve Bank of India has never been following text books. Once inside, Dr Rajan also has been following RBI's practice of allowing monetary policy to evolve based on the need of the day. Those who are finding fault with his approach are those who have gravely misjudged both RBI and Dr Rajan. Dr Rajan's actions so far have not proved that he is improving his CV for his next job. India needs him for a much much longer period than the present term of 3 years and in all probability, his career in RBI may last longer than the majority of earlier Governors. In India, people respect some of the Ex-Governors of RBI much more than IMF Chiefs who generally work for their constituency and bosses.
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