It is a serious debating point to judge, if the normal course of actions by the RBI will be able to bring down the rising rate of inflation in next three to six months ? Yes that is what RBI governor, Raghuram Rajan intended to believe as he said,“There is a sense of conviction about our plan to bring inflation down to eight per cent this year and six per cent next year,”.
The high interest rate regime is set to remain for some more time,as in its war against inflation, the Modi government has reportedly given a green signal to the RBI to keep interest rates high, a clear acknowledgement was forwarded by Raghuram Rajan as he accepted that he will join hands with the BJP-led NDA government to bring down the high inflation.
Since taking over the charge of the RBI in 2013, Dr Rajan had initiated fighting against inflation as his main priority and raised interest rates three times. But the growth oriented new Modi government has been more expected to put more pressure on the RBI governor to bring down interest rates to give a boost to growth, which has slipped under 5 per cent in 2013-14,it is exactly at 4.6% in the last quarter .
Here is the pointed argument that as there has been the usual practise in order to bring down the inflation is to use the main weapon in RBI's armament, bu maintaining high interest rates. RBI chief Rajan agrees that the new government’s plan to curb food inflation seems sensible and that he expected the public’s inflation expectations to fall in the future.
So also Rajan adds that both the government and the central bank have expressed the need to bring down inflation, while acknowledging the fact that economic growth is “very weak.” as he said,“we need to ensure, through a variety of steps, that we sustain the growth process,” .
Here it is worth noting to a point that Rajan was critical of Modi's Gujarat theory in the past and also wanted to maintain the autonomy of central bank. Dr Rajan had indicated that he will try to maintain his autonomy in setting up the interest rates. He had said, “I am happy to talk to the government, I am happy to listen to the government, but ultimately the interest rate that is set is set by me. The government can fire me, but they do not set monetary policy," .
INDIA HONEST , while accepting that it is too early to judge, what will be the chemistry between the central bank chief Rajan and the new government on principal, but one thing may be clearly said that the Modi regime has to push some out of box plan and actions, if it intends to come out of the inflation controlling but raising growth objective triangle in the present dismal circumstances for the immediate future to set a target for next 100 days to six months , as targeted .
IH suggests, one such out of box idea among many more that may be tried by making urgent and important specific reforms in logistic and distribution sector on supply side , that may achieve .3 % to 1 % decrease in inflation in next six months to one year, on its proper implementation in coordination with the state governments on the central governments initiative. Even it may result in a catalyst for raising fresh one million gainful job opportunities during next years in these sectors .