Mr. Raghuram Rajan, the new Governor of RBI, taking into consideration the inflation which is double digit today, has resorted to the same measure as his predecessor had done. He has increased the repo rate, rate at which banks borrow money from the RBI. It will make bank loan costlier and is likely to increase the deposit rate benefiting the people who are fix depositing in banks. Mr. Chidambaram always criticised the earlier Governor for increasing the interest rate. Now what is his reaction? The present Governor is close to him.
This monetary measure is not going to bring down the inflation. This has been tried for the last four years. Therefore, there is not going to be any relief to the people. What is important is to curb prices by increasing production, stop forward trading and stockpiling. It is also essential to curb speculation and stop the economy from being a speculative economy. It is also necessary to curb the luxurious import, import of luxury goods and also resort to price fixing of essential commodities, strengthen the Public Distribution System. Agricultural production must be boosted. If no comprehensive measures are taken like this, it is wrong to believe that the prices will come down and difficulties of the common people will be ameliorated. But the Government is not likely to do it because they believe market will bring down the prices.
It is a sad commentary on the market dominated economic policy of the Government.