India’s Inflation (7%) ~3year high, Be RBI’s all steps effective or What have to be done?



India touches record high Inflation of 7%~ on Mar08, 2008- Inflation 5.92% & on October27, 2008- Inflation 2.97%.
Higher inflation ,higher interest rate hurt economy.
What do you think?- that upto next Q2 “What have to be done??”

5 Replies to “India’s Inflation (7%) ~3year high, Be RBI’s all steps effective or What have to be done?”

  1. The Reserve Bank of India has been associated in the public mind with a negative image of an inflation.Its monetary policy statements have tended to focus on credit growth as a contributory cause of liquidity, leading to inflation, rather than an outcome of inflation. In fact, as input and output prices increase, the economy needs more credit, rather than less, to move goods and services. But inflation fighters in the RBI try to “de-grow” credit by putting caps on segments they consider inflationary, such as housing, real-estate, credit cards and personal loans.

    It is fortunate that, so far, the RBI’s icy gaze has not gone in the direction of agriculture. Indeed, in this respect, the directive that the RBI has from its political masters is just the opposite. The Finance Minister had set before the nation an objective of doubling credit for farmers over the past few years.

    It is ironical that while the RBI is trying to curtail credit growth in many sectors, the same institution has set itself the desirable objective of growing farm credit.


  2. Repeated oil price hike will only result into inflation. This nonsense has to be stopped and a national concern should be raised. Secondly the price of essential commodities go unchecked. Politicians are having control over sugar, rice, oil, dal (pulses). Government has to freeze the prices for 2-3 years. Thirdly, the economy is badly influenced by Stock Market, Gold and precious metals, real estate- to name a few. So controls are required on all these elements.

    In short, a financial emergency is the solution


  3. See we all know the answer rbi will increase crr rate which in turn will increase bank deposit rate and credit cost will be higher. I dont think the pundits of rbi or for that matter economists know any thing beyond that. If my suggestion has any meaning i will suggest decrease interest rate so that all those persons thrive on interest income have to save more decrease govt salaries so that this guys have to spend less decrease exice duty whereever possible. increase tax on interest incomes service sectors etc.


  4. To put in simple words, inflation is a situation where demand for goods is more than their supply. This means that currently the people in India have more money than the quantity of goods produced.
    The Government can do the following to control inflation:

    1. Cheaper substitutes can be imported to increase supply.

    2. The Reserve Bank of India can increase the interest rates and the bank rates so that fewer people borrow money and fewer people have purchasing power.

    3. The RBI cna increase the stautory legal requirement. This means that a bank cannot lend all its money. It must have some amount of the money with it always. This will also decrease the supply of money.

    Lets see what the Government does. We have a good Cabinet!


  5. present inflation of 7% announced yesterday has badly shaken our politicians and economist and RBI has limited choices in this.The reason is that the inflation this time is caused by supply constraint and is a world wide phenomenon.government is contemplating fiscal and monetary measures.presently the world food stock is at the record low and same applies for commodities like steel cement crude oil Aluminium copper etc which are at all time high rate.Fiscal measures like reduction of excise and customs are going to give marginal relief.monetary measures like CRR hike and interest rate hike will affect growth and should not be tinkered with.government need to take strict action against hoarding of food articles by invoking essential commodities act and steps should be taken seriously to improve supply of industrial and agriculture.India still ranks lowest in the world in terms of agro productivity.indutrially new stii plant need to be set up to counter the rising steel price.power is chief problem and huge investments in pwer generation are needed.similarly alternative sources of Energy is the order of the day in view of high Crude oil price.RBI has very limited role and if they hike CRR it will spell doom for industry.Hope better sense will prevail.





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