RE:inflation...
by Seshadri on Jun 14, 2008 03:45 PM
view 2:
the alternative - rising of interest rates was probably a stop gap option for RBI so as not to lose the effective current margins (read interest rates)... and hence i presume that the control is not on inflation as a whole, rather on the bank's anticipated interest gains...
problems erupt when the demand-supply theory is not strictly adhered to (which happens 99.9% of the time!!!)...
the banks probably would raise 2% above the RBI rate...
while arguing that this would control inflation, one has to consider the nature of the inflation, this is not an artificial hike rather a real and permanent hike caused by high fuel prices (mainly)... if IOC were allowed to sell petrol at its actual price (the price devoid of subsidy), probably the inflation figure would hit a silver jubilee!!!
so, essentially, the solution would lie in harmonised growth, which would ensure that all sectors grow at a uniform rate without too much pressure on the pocket...!!!
