Govt bats for growth. Will the RBI play along?

The relentless rise in the prices of food items has defied a solution. As the food inflation, now hovering at 18.22 per cent, adds to the over-all price rise, the RBI has given enough signals to raise the key rates. It wants to curtail money supply and control inflation before it goes out of hand. To address the issue of reining in inflation without hurting growth, Finance Secretary Ashok Chawla has made a sensible proposal for the Cabinet Committee on Prices to consider at its meeting later this week. He has the support of Finance Minister Pranab Mukherjee and the Cabinet committee too is likely to endorse it.
Mr Chawla has made a strong plea against raising the interest rates since it may hurt growth. On the contrary, the Prime Minister’s Economic Adviser, Mr C. Rangarajan, wants the apex bank to remove excess money from the system to ease prices. It will be interesting to watch which way the RBI leans. The UPA government is upbeat on growth and making all possible efforts to prop it up. To cool the prices, Mr Chawla has suggested administrative measures, which should have been by now already put in place. It is amazing that it requires a Secretary to tell the Cabinet Committee on Prices simple things like releasing more wheat and rice in the market, suspending the import duty on sugar and other “commodities of concern” or banning the export of milk products. It is plain common sense.
Why Agriculture Minister Sharad Pawar has reduced himself — as well as the government he represents — to being a helpless spectator as the soaring prices spoil the housewife’s budget remains a mystery. The states too have shown little interest in nailing the hoarders. At least, they should follow Mr Chawla’s advice on cutting commissions and duties paid by farmers in mandis, particularly fruit and vegetable growers, to reduce the pressure on prices. 

Source: The Tribune, Chandigarh, India.

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