How to Tame Inflation?

(Published in The New Indian Express in letter to editor column on 31 July 2010)
Bikash Choudhury



RBI announced monetary policy recently.Our central bank undoubtedly did a commendable job in attempting to control double digit inflation. But, inflation is unlikely to be tamed any time soon by monetary policy alone. The queue in front of Jewellery shops, ever increasing demand for real estate and a spectacle of fancy automobiles on the road, confirm about the presence of huge amount of liquid cash with people.
Govt. need to come out with Infra Bond with attractive terms to suck a portion of cash to create durable assets for common people with better ROI. This may cool down the market a bit without affecting growth momentum. To tighten the food Inflation State and Central Govt. must take exemplary action against hoarders and black marketers; and, at the same time may consider distributing excess food stock and other essential items through revamped Public Distribution System (PDS).
Govt. need to examine and plug all the sources of non-conventional supply of currency, large transactions taking place outside our money market, illegal exports across the borders and large scale betting on currency arbitrage. Last but not the least, Govt. also, needs to integrate the supply chain-cold chains to evacuate perishable farm products in real time, bringing a quarter of total green vegetable production on the plates which otherwise go waste.This will reduc the inflationary pressures and volatility in food products substantially.It is unlikely that bureaucrats does not know what needs to be done; but, the excercise would call for seer guts among highest levels in the Government.