HomeContact Site map   Google    www    iipm think tank
   
   
  Home > Scrutiny > National Issues > Welcome to the past...   
   
     
   Case Studies  
       
  Marketing    
  Human Resource    
  Information Technology    
  Finance    
  Strategy    
       
 
     
   Industries  
       
  Steel    
  Glass    
  Banking    
  Prophylactic    
  Auto    
  Hospitality    
  Energy    
       
 
     
   Other links  
       
  IIPM    
  Planman Consulting    
  Planman Marcom    
  Planman Technologies    
  Daily Indian Media    
  Planman Financial    
  4P's Business and Marketing    
  Business and Economy    
  The Daily Indian    
  The Sunday Indian    
  Arindam Chaudhuri    
  GIDF    
  Kkoooljobs    
       
 
  
         
National Issues
  
E C O N O M Y : M O N E T A R  P O L I C Y

Welcome to the past...
Monetary policy might reduce inflation, but it would cause disaster

   HSick 
industries?? Who cares!istory, it seems, is getting repeated again in India. Way back in 1994 when India was tasting the success of economic reforms, the government (with elections in mind) panicked at the sight of inflation. The hike in bank rates, then was taken up to control inflation. It took India almost 5 years to walk out of the industrial recession that followed.

Welcome now to the year 2007. Indian economy with a GDP of around $850 billion is booming at a rate of over 8%. Inflation is again lurking dangerously and the rulers are the same as in 1994. In comes the monetary policy that hikes interest rates. The goal remains the same as in 1994 and that is to reduce politically dangerous inflation (as elections are near in many states). The result is what we have to wait for.

Summarily, the entire output of the economy is certainly going to affect everybody in a nutshell. In the past 2 years, since 2004, the inflation rate has increased from 3% to over 6%, raising the prices of almost everything. The reason given for this has been the increase in input cost in most of the manufacturing products.

While cutting down the existing heavy import duty on cement, steel and edible oil could have been feasible alternatives for the government, it has chosen a path that might hurt the economy in the long run for which they seem to care the least. The increased rates have shot up the returns on the fixed deposits for the politically sensitive middle class (the banks were quick to announce the higher returns), but for those that have availed loans on 'floating rates', sufferings might just have begun. Manmohan Singh isn't a fool to not understand this, but he definitely has 'political' compulsions.


  
 
 
       
Home | Scrutiny | Publications | About us | Contact us
Copyright @2010 iipm think tank. All rights reserved.