With reference to “A one-point agenda for RBI” (Business Line, November 9), does the author mean that the RBI can and should tackle inflation on its own? There is no doubt that ‘uncertainties, paralyses and constraints’ have a direct and major impact on inflation. That being the case, asking the RBI to deal with inflation, regardless of the other factors is unfair. Why is there instability in the purchasing power of money, why does it vitiate the economic environment, and what can be done to prevent this? There are no simple answers. Inflation is largely a product of fiscal policies; whereas money supply, and liquidity for whatever purpose, is mainly due to monetary policy. Relating inflation to monetary policy means the government and the RBI have to work together. A major problem we have been having of late is not high inflation but the Government’s unwillingness to take responsibility for that and the RBI’s decency in not highlighting this point. And this explains why and where ‘‘deep reform is called for’’. The RBI cannot be made a scapegoat. Players can have their rules and the RBI can let the game be played by them; it can blow the whistle when the rules are breached, and it has linesmen to help enforce them. The quality of the game is the responsibility of the players and too many referees don’t help.
- Devraj (HBL)
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