<b>Letters:</b> Economic clarity?

This refers to Sukumar Mukhopadhyay's letter, "The definition of reform" (January 7), a rejoinder to A Seshan's article, "The dangers of 'tolerable' inflation" (December 27). There can be no quarrel with A Seshan's legitimate lament that there is no explicit definition of the term, "monetary stability" that figures in the preamble to the Reserve Bank of India (RBI) Act. Popular usage, which covers various terms such as "reforms" and "policy paralysis", evolves over a period of time, and generally entails no confusion. However, a parliamentary Act stands on a different footing, and the need for precision and clarity in the language used cannot be overstated. In the absence of such clarity, "monetary stability" has apparently come to be interpreted as "price stability". It cannot be said that the author has opted for a policy of "rigid price stability". He clearly stated early on in the article that "a zero rate of inflation is not practicable or even desirable". Seshan's pertinent questions to the expert committee may be paraphrased as whether it is right for RBI to factor in a certain level of inflation while projecting money supply requirements, and, if so, whether the rate should be as high as the current five per cent or a moderate two to three per cent.

Mukhopadhyay claims that "as long as... (the rate of) inflation is less than the economic growth rate, it does not hurt the consumer". The way it is stated, the reference seems to be towards the rate of growth in nominal income.

Parthasarathy Chaganty, Mumbai

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