The Reserve Bank of India (RBI) should be congratulated for sticking to its dharma of fighting inflation by raising the policy rates stiffly despite the contrarian pressures brought on it by vested interests. If there is one institution left in the country that can be depended on to look at policy options in national interest, it is RBI. Though RBI could be hamstrung by a politically-motivated finance ministry, fortunately the finance minister seems to have given it a free hand to formulate policy. There is an undertone of unhappiness in RBI’s statement that in addition to its own responsibilities, it also has to shoulder the government’s burden of fighting inflation. The thoughtless extension of the National Rural Employment Guarantee Scheme without considering its consequences and the mismanagement of the foodgrain stocks are just some examples and show that monetary policy cannot take any compensatory action.
A Seshan, Mumbai
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