The Hindu Business Line : FM's advice

During his visit to the US, the Finance Minister is reported to have advised the developed countries not to raise interest rates to fight inflation as the latter is caused by a rise in oil price.

Unlike the developing countries, the West is not as much interested in economic growth as in price stability and protecting the existing standards of living.

In the US, for example, growth only means a household having an additional car or TV. A 2-3 per cent price rise rattles the public and the government.

Ever since the Rome Club published its seminal study on the limits to growth the West has come to terms with the realisation that growth cannot be forever.

The disadvantaged sections of society constituting a small proportion of the population suffer in any case for failing to educate or equip themselves with skills demanded by the society.

It is now an accepted hypothesis that to stop inflation in its tracks the growth of money supply should be decelerated, whatever may be the cause.

It is in that context that developed countries raise interest rates. Any consequent recession does not mean the same hardship as it did a half century ago, given the social security benefits.

A. Seshan

Mumbai

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