Taming inflation
The Reserve Bank of India (RBI) has raised the repo rate from 4% to 4.9% in a span of just 34 days to contain inflation. It says the inflationary phase the country is passing through is a result of supply shocks, mostly related to food items. The basic question then is will making money a little dearer remedy the supply shocks experienced in daily life and in meeting daily necessities? There is very little connection between the two. Two, will not a higher lending rate lead to increased cost of production and fuel inflation? Improving the supply side is what is required, which is probably not easy today because of the Russian war against Ukraine. At this juncture, the RBI seems to be continuing to take monetary measures, the impact of which it is not sure of, or which can even be counterproductive.
P. Mangalachandran,
