Economic Growth vs. Inflation

RBI had increased the policy rates several times in the past one year or so in order to tame inflation, but in vain. There has to be an equilibrium between economic growth and inflation. The choice of priority between the two is a tricky one. At any point of time, one should not be a burden for another.

Because of the increase in policy rate, banks are forced to increase interest rates due to which loans are becoming costlier. This is increasing the burden on common man who is already reeling under high price of essential commodities. To fuel the situation further, government had deregulated the price of petrol. This is having a huge impact on the inflation control measures taken by RBI and government.

The government cannot simply wash its hands off by deregulating the price of petrol and leaving it to the oil companies. The government should be responsible to the people of the country. Its first priority should be the common man, which constitutes majority of Indian population.

Other important factors which fuel inflation are hoarding and black-marketing. The government has to take effective steps to ensure sufficient supply of essential commodities in the market. Tonnes of food grains are getting wasted at government godowns. If these can be injected into the market before rotting through the public distribution system, it may ease inflation to some extend and also provide some relief to the poor people.

The increase in policy rates is only affecting the lower and lower-middle class people. The upper class is not affected much. In this adverse environment also, the real estate business in India is booming making it unapproachable for the common people. This makes quite evident that black money is prevalent in our economy. Some channel reports suggest that the deposits by Indians in Swiss bank amounts to 40% of our GDP.

Without having a control over the black money, no steps taken by the govt. and RBI will ease inflation. The current growth rate of India is attributed to the fact that wealth is being accumulated onto the hands of the rich. The gap between the rich and the poor is widening alarmingly.