This refers to Charan Singh's article "How monetary policy can help India regain its youth"(January 9). The author's narration of demographic factors and their influence on inflation, interest rates and growth is quite innovative. But his reference to the role of monetary policy in containing inflation appears to be incorrect. While he rightly mentions about the supply side and political economy factors being responsible for raging inflation, his faith in the monetary policy's ability to control inflation appears to be little misplaced in the Indian context. The influence of the ageing and young population the on consumption patterns is a universal phenomenon, and not confined to India alone. When that is the case, it is better to focus on the roots of inflation. The monetary policy has implications on the savings-investment gap and the Reserve Bank of India can address this issue instead of directing the policy for taming inflation. It is very clear that if the unfettered freedom enjoyed by the middlemen is curtailed, the supply bottlenecks can be easily eliminated.
K V Rao Bangalore
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K V Rao Bangalore
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number