Letters: Focusing on the supply side

This refers to the report "After easy start, Modi govt faces first key test" (June 17). The Narendra Modi government should not repeat the mistakes of the previous government by thinking that it is the Reserve Bank of India (RBI)'s duty to address the issue of inflation. It is time for RBI Governor Raghuram Rajan to remind the finance ministry of the importance of the "supply side". Vivek Dehejia's column "Rise of the supply side" (Marginalia, June 17) explains the importance of supply-side economics in controlling inflation. The food inflation that continues to stare the economy is the outcome of the failure of the previous government to take care of the supply side.

Also, the RBI, while pursuing its monetary policy to control inflation, should replace its old habit of tinkering with policy rates with another weapon in its armoury - 'selective credit control' (SCC) directives. It is a mystery why RBI has not been issuing SCC directives to commercial banks. These directives directly curtail the lending powers of commercial banks in three ways - increasing margins, hiking lending rates and bringing down the level of credit against select commodities.

K V Rao Bangalore

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