oppn parties Controlling Inflation: Government Intervention Needed

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  • The Supreme Court told voters whose names were deleted from Delhi's draft electoral rolls not to be apprehensive about seeking re-enrolment through Form 6, after the Election Commission assured it that such applicants would not be prosecuted merely because their names had appeared in earlier rolls
  • Congress leader Rahul Gandhi opened the party's campaign for the 2027 Punjab Assembly elections with an Insaaf rally in Sangrur, Chief Minister Bhagwant Mann's home district, accusing the AAP government of failing to control drugs, gangster violence and corruption. Congress president Mallikarjun Kharge outlined six commitments, including a drug-free Punjab, protection of farmers, employment for young people and action against corruption
  • Rahul Gandhi accused the AAP government of running Punjab through a remote control from Delhi and questioned Bhagwant Mann's ability to tackle drug abuse, making personal allegations about the Chief Minister's conduct during their time together in Parliament
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Controlling Inflation: Government Intervention Needed

By Our Editorial Team
First publised on 2022-04-09 03:37:29

About the Author

Sunil Garodia The India Commentary view

The MPC meeting predictably maintained status quo on key policy rates and the accommodative stance. But with rising inflation, RBI faces a dilemma. Almost all other central banks have targeted inflation and have started, or indicated a strong willingness to start, raising rates and squeeze liquidity. In India's case, as the economy is showing signs of strong recovery despite consumer demand not going up significantly, the RBI cannot totally junk support for growth to cool prices. Further, the current inflation is not demand-pull inflation. It is cost-push inflation due to high commodity and fuel prices and disruption in supply chains. Hence, squeezing out the excess money floating in the economy is unlikely to cool prices. Also, raising rates at this juncture is going to have a negative effect on growth.

But the RBI has rightly said that it will henceforth bring inflation above growth in its list of priorities. It has also revised the inflation projections to 5.7% from 4.5% earlier. It has also said that India is likely to grow at just 7.2% in FY23 and not at 7.8% as forecast earlier. The ongoing war in Ukraine, along with the sanctions placed on Russia, is likely to cause further disruptions for supply chains and increase the price of crude and commodities and is the main cause of worry. The RBI has indicated that it will have an "eye on withdrawal of accommodation", signaling that it might raise rates going forward and also change its stance from accommodative to neutral.

But more than monetary policy, the economy now needs fiscal policy intervention by the government. With tax collections at record high (India collected Rs 27.1 lakh crore in taxes in FY22 which was 34% higher than FY21) and trends showing that this is likely to increase further, there are many options available for the government to intervene and provide relief. It must reduce Central taxes on fuel to reduce prices and prevent high transportation cost from having a spiraling effect on inflation. It must spend on infrastructure projects to give further push to growth. It must also provide DBT to the poor in cash where needed and keep on helping businesses through restructuring of loans or providing new loans. It must also crack the whip on arbitrary upward revision of prices of products in some sectors. 

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