RBI can not control inflation with its temporary monetary policies - Group Discussion

RBI can not control inflation with its temporary monetary policies.

For

- Inflation is not a spontaneous reaction it builds up over time and is caused by various reasons, thus temporary policies to control inflation is not going to be effective.

- Temporary policies will contain it but will not eradicate the problem of inflation from its root.

- Controlling inflation with its temporary monetary policies will result in deterioration of growth and development.

- Temporary monetary policies would result in moderation of inflation over time but it will still remain above tolerance level.

- There are various concerns over the fiscal deficit; the current account deficit and deteriorating asset quality loom large.

- The food inflation has resulted in the rise of prices of fuel and other commodities which accentuated domestic inflationary pressures.

Against

- The temporary policies have reduced the stress on the economic frailties that had restricted the growth somewhat.

- RBI has increased the repo rate or the rate at which it lends money to other banks which is one way to deal with inflation and has worked efficiently.

- Temporary policies that have been implied is due to the fact that supply shocks are temporary and they are the main reason driving inflation.

- It allows the bank and private sectors to adjust to the high interest rate gradually.