Letter to BS: At a 10-month low, retail inflation below RBI target

This refers to the report “At a 10-month low, retail inflation below RBI target” (September 13). Though the food and overall inflation as of August 2018 is within the envisaged target, the fuel inflation is fast rising because of the rising price level of crude in the international market. Besides that, the rupee is sliding, the current account deficit is widening, and since the government has cleared the new crop procurement policy, chances are that the prices of food grains will grow. The monetary policy committee of the Reserve Bank of India will have to look at hiking the policy rates to strengthen the rupee and to prevent the cascading effect of the rising fuel prices in the economy.

A rate increase will lead to the growth of household savings, capital inflows, which are crucial in promoting investment and job opportunities. A major chunk of the household savings is from people who are depended on interest income for their livelihood and the increase in repo, if transmitted by the banks without lag, will be a respite to people who are solely depended on the interest.

VSK Pillai  Kottayam

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