The article “RBI confronted with multiple concerns” (Business Line, December 12.) rightly pointed out the issues before the RBI in the monetary policy review on December 16. So far, it was observed that to tame inflation, raising key rates resulted in rising lending rates by banks and reduction in growth rate. The question is: How far can we sacrifice growth to curb inflation and whether it is sustainable in the wake of reduction in foreign investment and, thereby, depreciation in the value of the rupee? Already, industrialists and loan borrowers are burdened with heavy interest charged by banks. The time has come for the RBI to begin the process of easing interest rates and check the continuous decline in the value of rupee. At the same time, the growth rate should not be allowed to fall further because of monetary policy decisions. A combination of growth and inflation of 7 per cent and 8 per cent would serve the economy well, provided the RBI eases interest rates, preferably starting with the ensuing monetary policy.
T. S. N. Rao (HBL)
