The Hindu Business Line : Monetary policy

The RBI's decision to hike the repo rate by 25 basis points and increase the provisioning that commercial banks have to make when lending to real-estate, the capital market, etc., to curb inflation is, no doubt, welcome.

But it must be remembered that judicious fiscal policies should buttress the monetary policy to curb the rise in prices of essential goods.

The ever-increasing revenue expenditure (on salaries, pension, subsidies, etc.) to keep the salaried class in good humour has undoubtedly added to the inflationary spiral.

The salaried, whose salaries, dearness allowance, perks, etc., are enhanced every now and then, seldom realise that they have to pay back a large chunk of it to the government in the form of income-tax at the end of the fiscal year. In fact, many are driven to take fresh loans from the organised and unorganised money markets to foot the tax bill.

Hence, the decision to bank on monetary policy alone to contain inflation may not be the right approach.

The Government should also address the problem of burgeoning revenue expenditure in right earnest.

S. Ramakrishnasayee,

Ranipet

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in

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