Sixteen. THAT is the number of times the Prime Minister mentioned the term growth at last weeks Full Planning Commission meeting. The term inflation,though,failed to find a mention even once in Manmohan Singhs speech. Contrast this with the Reserve Bank of Indias mid-quarter policy review statement,which was peppered with inflation at 23 different places,clearly accentuating the stark difference in the concern that the RBI and government have shown on the growth versus inflation dilemma.
The governments obsession with growth is palpable,considering that it has been castigated from all corners for policy inaction,corruption and living beyond its means,all of which have brought business sentiment and growth crashing to the ground. But inflation clearly has been a bigger problem. The WPI inflation in the five years to 2012 has averaged around 7 per cent. In fact,from November-2009,inflation averaged at 8.8 per cent,nearly four percentage points higher than the RBIs targeted inflation ceiling of around 5 per cent. The RBI,clearly,has enough grounds to stay focused on inflation,even at the risk of growth being compromised,despite the growing clamour for a rate cut from the government and the industry.
But undeniably,for the central bank,the continuing worry remains inflation. Already,its two-and-a-half years since the RBI has been working at blunting runaway inflation,having started way back in March 2010 when it hiked the repo in staccato steps from 4.5 per cent to 8.75 per cent. Even as inflation has failed to respond,GDP growth dropped steadily from 9 per cent to 5.3 per cent. No wonder then that the RBI has stuck to its guns now and has refused to budge on the demand for a cut in policy rates,the governments new-found enthusiasm for reforms notwithstanding.
anil.s@expressindia.com
