This refers to the edit “Inadequate response” (June 19). It may not be fair to criticise the Reserve Bank of India (RBI) for keeping policy rates steady. It would have been very difficult for it to affect reductions purely on the basis of core inflation figures when the headline inflation, which affects the common man more, is refusing to come down from double-digit numbers.
Besides, growth-stimulating investment in the context of high inflation needs well-coordinated fiscal and monetary measures. While reducing policy rates in the last quarter, RBI had cautioned the government about this and expected it to take steps for fiscal consolidation and removal of supply side constraints. But the government affected a half-hearted, inadequate increase in petrol prices, leaving diesel price untouched. How long can RBI carry the burden of managing the balance between growth and inflation with the government showing no political courage to bring down heavy subsidies, liberate restrictions on foreign investments and remove curbs on access to resources like land and minerals. By taking this bold step, RBI has given a sound warning to the new finance minister and the government to discharge their part of responsibility.
Y G Chouksey Pune
...but disappoints markets
The government’s failure to address supply side constraints is the reason for the high level of inflation. In the absence of a credible policy initiative from the government, the Reserve Bank of India has clearly indicated that monetary policy tools alone will not be sufficient to control inflation and prop up growth. Of course, it is up to the government to initiate policy prescriptions, but RBI could still have cut policy rates by at least 25 basis points to boost market sentiments. Indeed the industry bodies are disappointed.
Srinivasan Umashankar Nagpur
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