The editorial ‘Confusing Signals’ (Business Line, June 18) rightly comments that the RBI’s credit and liquidity control measures and the dear money policy being pursued for some time have not yielded the desired results. In fact, after every step taken by the RBI, there has been further increase in inflation. Now inflation has hit a seven-year high of 8.75 per cent and, consequent on the fuel price hike, will soon reach double-digits.

Liquidity tightening and credit control have had little effect on inflation control and management. What is required is creation and expansion of job opportunities, both in the rural and urban areas. The stress must be on faster growth, with greater inclusiveness, so that more money comes into the hands of all, particularly the disadvantaged, so they can cope with the effect of inflation and price rise. If growth is curtailed by RBI by means of interest rate hikes, the consequent deferment of capacity expansion for augmenting production will suffer, and this will tell upon the economy.

There is lot of scope for growth in rural India, particularly in such areas as non-farm sector, rural BPOs, rural IT, rural services, etc. These must be exploited fully for achieving faster growth. The National Rural Employment Guarantee Programme must also be implemented scrupulously and with good governance in all States.

As rightly stated, sectors such as infrastructure, capital goods and retail trade offer much scope for employment and growth. To facilitate these growth opportunities, the RBI must refrain from interest rate hikes at this stage as it will tell upon production in all sectors and reduce supplies, acting as a spur for inflation growth instead of GDP growth.

K. K. Ammannaya Udupi

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