With reference to the editorial, "Transmission travails" (September 3), the need of the hour is to unshackle interest rates of tax-saving instruments and make these largely amenable to changes according to market conditions so that households can make conscious decisions on the matter. These rates should no longer be held hostage to the 'political' wisdom of the government. Of course, the Reserve Bank of India (RBI) can't do much here as fiscal policies (the taxation part) are the sole prerogative of the government.
An active market for bonds as recommended by the Urjit Patel Committee must be given serious thought. Both the RBI and the government should function in coordination to meet the twin objectives of containing inflation and achieving the desired level of growth in the economy. The government has fixed six per cent as the inflation rate target for the RBI till March 2016. But how can the RBI control inflation while also ensuring much-needed growth through rate cuts at the call of corporates, who wish to see a spurt in growth even as demand and investment conditions are almost absent?
Any efforts by the RBI to supplement growth are bound to jack up inflation as the two usually go hand in hand in a developing economy. It's time the government gave enough elbow room to the RBI.
S Kumar New Delhi
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