IIPM EDITORIAL: Inflation Management

The answer to both the questions would be a reso

unding ‘no’. To be sure, there can be a debate about what exactly is causing the prices of food articles to go up. But even Mr. Reddy will find it hard to accept that a 30% growth in credit off - take is responsible for this. Why, then, is the RBI Governor coming out with loaded statements like “inflation management is a bigger priority than growth?” Once again, cut through the jargon and the embarrassing and simple realities stare you in the face. The fact is, rising inflation is beginning to hurt the ruling UPA coalition very badly. Th e leading member of the coalition, the Congress, has recently been drubbed in assembly elections in Punjab and Uttarakhand, with voter anger most visible in urban rather than rural parts of the two states. The ruling coalition lost to the BJPShiv Sena combine in local elections in metropolitan Mumbai. And all signs indicate another drubbing in local elections in Delhi. The question may be uncomfortable, but it needs to be asked of Mr. Reddy: To what extent is his ‘fundamentalist’ monetary policy to tame inflation driven by sound economic logic rather than political compulsions of the UPA government?

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