.............Subba Rao, RBI Governor feels that rate hike is necessary to curb inflation. If inflation is due to excess money supply, then RBI Governor’s prescription is correct. But in the present context, food price hike is due to demand supply mismatch which in turn is due to wastage of food produced. Under the circumstances, an interest rate hike will not bring in the desired results. Only fiscal measures can bring the desired solution to the problem. Rate hike will only help the fixed deposit investors to enjoy more returns. But here again, the fixed deposit return can be eroded by high inflation and the investor is a net loser. But he has no choice.......................
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