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Economist Bhagwati demands realignment in monetary policy stance adopted by RBI

22 Nov 2012 Evaluate

Stressing the need to shift focus on growth from the current inflation-fighting mode, Economist Jagdish Bhagwati, demanded for realignment in the monetary policy stance adopted by the Reserve Bank.  In the October policy, RBI for the second time this year revised upwards its inflation forecast to 7.5 percent by March-end.

RBI has been blaming the high fiscal deficit driven by subsidies for the sticky inflation and asked the government to offer a clear fiscal road map. Amidst March 2010 and October 2011, RBI had been solely focusing on inflation fighting through 13 rate hikes. But over three years of inflation fighting has not yielded the desired results as it come down from double-digits primarily due to seasonal factors, especially growth. Further, Bhagwati added that 1991 reforms have helped in boosting growth which has given the resources that can now be allocated towards social welfare.

Moreover, amid the debate over organic versus genetically modified crops, he stressed on the need to adopt the latter, in spite of the concerns voiced by environmentalists and also a case for bringing down tariffs, citing the highly elevated tariffs of around 12 percent in the manufacturing sector which makes Indian goods uncompetitive in the international market.

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