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Topic : Inflation in India-government policy
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Credit policy 2011 " Will it work in reining inflation"

Created by : Niraj S Kakkad, Manager - Wealth, Investascent Wealth Advisors Pvt Ltd  | 05 04 2011 08:44:56 +0000
Industry : BankingFunctional Area : Global Business(Strategy & Execution)
Keywords : will it work in reining inflation credit policy 2011
Activity:  445 views;  last activity : 05 06 2011 09:20:25 +0000

Our country has been reeling under the inflationary pressure for some time now, finally the credit policy has raised the repo rate by 50bps. Do you think this strategy of RBI will help rein in inflation and bring it below 6% in this year?

  
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I doubt the credit policy can only pull down the inflation. There are too many factors contributing to it. RBI is trying its best pull down the circulation of money. The Middle class and the poor will be greatly affected by these measures. The external factors on which Govt. may not have control, yet the Govt. have other avenues to control the inflationary trends. Govt. lacks a good agriculture policy to promote the agricultural sector. There is a great imbalances in Exim policy. There are heavy stocks of Rice, Wheat etc. Govt. neither released them to the market nor exported them. Improper distribution system is one other contributing factor. Govt. is failing to promote cultivation of pulses. No seeds, no fertilizers. No storage facilities. There are too many. We cant list them out. The manufacturing sector is not just the establishment big industrial houses. Technology has to be taken to the rural areas. Every village has to be made a manufacturing hug. Industrial houses could able to run their show because of the demand, the other factors are pulling them down. With this credit policy, the purchasing power of the people may come down and the demand may diminish.
By Srinivas suravajhala, Asst. Manager.  05 04 2011 09:57:54 +0000
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when velocity of money is more nothing is assured.
By sudhakar , BUSINESS CONSULTANT  | 05 04 2011 10:30:30 +0000
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I believe the strategy laid out by RBI is quite aggressive and in the right direction, but there is no visible improvement in the inflationary trends over the past few months, which has got me wondering that whether our present strategy is good enough to rein in inflation or a fresh perspective is required for our county's economists to improve upon this inflationary trend. I believe some more improvement on the governance side might filip the required change.


By Niraj S Kakkad, Manager - Wealth, Investascent Wealth Advisors Pvt Ltd  | 05 04 2011 08:44:56 +0000
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It is only creating an artificial feeling that inflation is reined and RBI is only postponing another crisis on cost of living....
By Ganesh Ramaswamy, Area Sales Manager - Mortgages, Bajaj Finance Limited  | 05 06 2011 09:20:25 +0000
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rightly said. the thrust on agriculture and rural economy is not being done on a scale in proportion to their central role in India's economy. the govt's talk on these turns out to be only lip service.
By Ravichandar S, investment  | 05 05 2011 14:02:50 +0000
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The cause of the current, persistent inflation are not monetary in nature. As the RBI's own policy review has said, partly it is caused by rising commodity prices, especially metals across the world. Ongoing unrest and uncertainty in the West Asia has seen crude prices crossing the $110-mark . Neither of these are factors that the RBI can control. On the domestic side, food inflation is partially caused by the higher administered prices being paid to farmers as a part of the government's social agenda. While at a social level this is a welcome move, it is bound to have an economic impact in terms of higher prices. The enormous resources being pumped into the rural hinterland through initiatives like National Rural Employment Guarantee Scheme are another factor. These have not only raised the cost of labour (sometimes also leading to labour shortages in sectors like construction) but have also boosted rural demand. Again, while both these are welcome measures on both social and economic grounds, (provided leakages can be reduced ), they add to the inflationary pressures. What the RBI has signaled is that it is willing to take a more pro-active and hawkish approach on inflationary expectations . If this means lower growth in the short term - so be it! It believes this approach is necessary for sustained growth at moderate levels of inflation. There can be little argument with this.
By Manish Lalla, M.M.S student, H &GHM INSTITUTE OF MANAGEMENT  | 05 05 2011 13:44:12 +0000
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Mr. Srinivas has explained the whole thing very precisely.

To bring inflation under control there are still many things to be done.

But perhaps it is not possible for them to do all this.

 
By Ekta Dutta, Hedge Fund Analyst/Trader, ING Vysya Bank  | 05 05 2011 08:18:49 +0000
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I don't think so,that it will pull down the inflation rate in long term it is possible to reduce some extent but it is very difficult to say that pull down will remain long period of time while food and infrastructure ,oil price etc moving up words .
By Devendra Pratap singh, Finance Executive, Devendra pratap singh  | 05 05 2011 07:10:16 +0000
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