by August 3, 2018 0 comments

Beware!The RBI has identified and red-flagged inflation as a major issue for the economy. Now’s the time for Government to react.

Caught between the devil and the deep blue sea, the Reserve Bank of India (RBI) has taken the tough but necessary decision to raise interest rates by 25 basis points. Though coming close on the heels of another recent hike (about two months ago), the move was not unexpected given mounting uncertainties that continue to trouble the economy. What is commendable is RBI Governor Urjit Patel’s reasonably firm hand on the tiller which is required to steer past the tide of factors both domestic and external which could cause the economy to sink. Globally, crude oil prices have reached $75 per barrel and there is unlikely to be any relief on offer on that front in the near future thanks to a complex geopolitical scenario. On the other hand, the ongoing trade war between the US and China has taken its toll in the form of disrupting the global supply chain and productivity which has led to higher inflation and lowered projections for economic growth.

But while happenings in and around the world are not under our control, we seem to have also been indifferent to the developments back home. With a rising Consumer Price Index, both the Centre’s as well as the States’ finances have seen a steep downfall; our leaders’ irresponsible promises cutting across party lines of huge loan-waivers to the farmers is a major fiscal concern. A steep hike in the Minimum Support Price for Kharif crops announced by the Government has also, in effect, stoked inflation. Rainfall has been below average in many parts of the country despite earlier predictions of a good monsoon. Core inflation spiked to 6.4 per cent and retail inflation rose to a five-month high of five per cent in June. In such a situation, the RBI is doing what it can put the spotlight on inflation which still is a major domestic issue. It is now for the Government to take tangible measures to contain inflation.

Writer: The Pioneer

Courtesy: The Pioneer

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