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RBI's failure in controlling inflation
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TOPIC: RBI's failure in controlling inflation

RBI's failure in controlling inflation 5 years, 1 month ago #647

RBI has increased interest rates again in this credit policy but it has failed to tame the inflation. In fact as the rates are increasing, inflation is also rising....why such anomaly
Last Edit: 5 years, 1 month ago by prateekrocks.

Re: RBI's failure in controlling inflation 5 years, 1 month ago #653

the increase in the interest rate has done little to contain food inflation. On the contrary, costlier loan has hampered the growth rates of Gross Domestic Product and industrial output...according to the RBI, while industrial growth rate decelerated, agricultural growth rate accelerated in this period. Yet the food price index soared upward. This clearly is a failure of the country’s monetary policy...

Re: RBI's failure in controlling inflation 5 years, 1 month ago #654

Unlike the industrial sector, the agricultural sector functions outside the organised money market. Farmers undertake production not for cash alone, but also for subsistence. Monetary policy has little effect on agricultural production.

Thus, farmers have to use costly fertilizer, pesticides, and irrigation to derive maximum yield.

The gradual reduction of state subsidy in fertilizer, pesticides and electricity for pump irrigation has escalated production cost. Deregulation of the petroleum sector, and allowing the oil PSUs to operate in a free market has imposed an additional price burden on farmers, as oil price keeps rising. Oil price hike, at double digit rates, results in higher transportation cost for agricultural commodities as also higher production cost for farmers using diesel pump sets for irrigation.

All the above is fueling food inflation

Re: RBI's failure in controlling inflation 5 years, 1 month ago #657

India's monetary policy transmission is not effective....hence repeated rate hikes are not able to control inflation..
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