No-one knows when the inflation will come down

What an irony? No one … not even the RBI knows when the inflation will come down. On one hand RBI has reduced the CRR by 25 bps which, for sure, will release around Rs 18,000 crores in the coming months and then you can’t say RBI has no clue about when inflation will come down.

The businessman, media and the stock markets will keep pressurizing and cling to demanding lower interest rates from the RBI. But it’s the RBI governor’s
job to actually lookout for everyone, including the mango men. He has to keep a very fine balance between progress and inflation. And if someone thinks that there can be growth without inflation, is a novice living in the fool’s paradise.

Inflation depends upon many reasons known and some of which are un-known. No one can predict the weather and it is hard to envisage prices of the commodities in the international market. Inflation may be seasonal e.g. in this festive season everyone wants to buy gold. Inflation may be artificial as in the case of DLF-Vadra gate or due to the nexus between builder and real estate dealers. Inflation can be caused by many reasons, the basic one being the supply of money and ease with which one can acquire it. Yes RBI has increased the supply of money by reducing the CRR, to enhance growth, but has not eased the acquisition by keeping the Repo Rates unchanged. Inflation can be only regulated by keeping a very tight monetary policy which Mr. D.Subbarao is doing a good job about, though sacrificing growth as many would say.

Remember Prime Minister of India stating in his national address, sometime back, that "money doesn’t grow on trees" hence rationalising FDI, ever wondered how that money coming into India can create havoc with inflation if FDI isn’t regulated the way it should be done.