ECONOMIC GROWTH OR PRICE CONTROL: A DILEMMA
The latest information of price rise crossing a high of 7.41% in 42 months led by increase in
steel, cement, food grains, sugar, edible oils, vegetables and other essential items has set the alarm
bells ringing in the polity of the country. The Union Cabinet has met twice without any major policy decision. The prices of various commodities are high worldwide and even the imports have not been able to contain the price rise.
The Government committed a blunder by restricting money supply artificially to real estate, industry and housing sectors resulting in increase in interest rate, reduced credit availability and apprehensions of a slowdown in growth of industries, construction sector and capital goods sector. The sentiment of Indian industry is on its lowest ebb in the last 5 years as due to subprime crisis there, a recession in US economy is apprehended. The Indian industry is keeping its fingers crossed to an adverse impact on India. The sentiment ultimately got translated into subdued capital market. In this back drop, immediate policy initiatives by the Government is crucial to the direction of economic vibrancy. The Growth requirements of low cost funds require a reduction in prime lending rates, easing of the credit and an ample increase in money supply for propelling growth at substantially lower interest rates. We need to learn from US experience and cut rates to counter recessionary tendencies. The price rise needs to be checked by addressing supply side. The Government may consider an immediate ban on commodity trading in essential commodities, dissuade hording and ban export of items like iron ore and other items propelling inflation. If the food grain price rise results into higher flow of value to
agriculturist it need not worry us.
steel, cement, food grains, sugar, edible oils, vegetables and other essential items has set the alarm
bells ringing in the polity of the country. The Union Cabinet has met twice without any major policy decision. The prices of various commodities are high worldwide and even the imports have not been able to contain the price rise.
The Government committed a blunder by restricting money supply artificially to real estate, industry and housing sectors resulting in increase in interest rate, reduced credit availability and apprehensions of a slowdown in growth of industries, construction sector and capital goods sector. The sentiment of Indian industry is on its lowest ebb in the last 5 years as due to subprime crisis there, a recession in US economy is apprehended. The Indian industry is keeping its fingers crossed to an adverse impact on India. The sentiment ultimately got translated into subdued capital market. In this back drop, immediate policy initiatives by the Government is crucial to the direction of economic vibrancy. The Growth requirements of low cost funds require a reduction in prime lending rates, easing of the credit and an ample increase in money supply for propelling growth at substantially lower interest rates. We need to learn from US experience and cut rates to counter recessionary tendencies. The price rise needs to be checked by addressing supply side. The Government may consider an immediate ban on commodity trading in essential commodities, dissuade hording and ban export of items like iron ore and other items propelling inflation. If the food grain price rise results into higher flow of value to
agriculturist it need not worry us.
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