'RBI should not intervene right now to manage inflation' - Hindu(Fuel Economy)

Before I get into the details of the sources of inflation, let me lay out up front that while the inflation rate moving up to 7 per cent is certainly something to be wary about, it is still well within the tolerable limits and certainly too early for us to start imagining a doomsday scenario. Having said that, let me emphasise that the trade-off between growth and inflation is a well documented phenomenon any country experiencing high growth generates a pressure on prices resulting from the higher income earned by individuals that benefit from the growth momentum. I think the RBI should not intervene right now to manage inflation since monetary measures invoked to tackle inflation may adversely impact the growth prospects of the economy. All governments have been known to adopt short term measures to fight sudden changes in prices and adopt long term changes when the source of inflation is due to structural inefficiencies. I do not believe that the current spike in inflation can be “blamed” on the Government failing to adopt long term policy measures when inflation reared its ugly head the last time around. International increase in crude oil prices, geopolitical events impacting supply of products and natural disasters and calamities are all factors that contribute to inflation. read more

[Tags]inflation, prices, supply, economy, growth, measures, fuel economy[/Tags]

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