Is
India in a stagflationary phase? Chakravarthi Rangarajan, the chairman
of the Prime Minister’s Economic Advisory Council (PMEAC), spilled the
beans in February in his paper titled ‘Growth and Austerity: The Policy
Dilemma’. “It is pertinent to note that stagflationary tendencies
have already reared their head in emerging markets, like India, where
financial intermediation was never a problem,” he wrote, creating quite a
flutter. The paper co-authored with Ashok Sheel was published in ICRA’s
Money & Finance February issue. But the veteran economist and
former Reserve Bank of India (RBI) governor was quick to retract his
position, possibly to calm the nerves of Indian policy makers and ruling
party bosses at a time when elections are just around the corner. In an
interview to rediff.com,
he pointed out that the paper did not say India is facing stagflation.
“The term used is ‘stagflationary tendencies’ in developing economies as
a whole, including India, to describe a situation where growth below
trend and high inflation co-exist,” he said in defence.................
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