Dinesh Kamath's Editorial 'Challenge for policymakers' that was published in Newsband

Challenge for policymakers

The multi-month low retail and wholesale inflation poses challenge for policymakers and the central bank. Monetary policymaking is a challenge. Governor Das alluded to this in a recent speech where he pointed to the divergences and volatility in different sub-groups as a major challenge in inflation assessment and projection.

Prominent policymakers, including principal economic adviser Sanjeev Sanyal, have called for the RBI to take a re-look at the interest rate structure. It will be interesting to watch how the RBI reacts to these calls.

The Interesting challenges for the Inflationary pressures has been mounting up ever whenever the RBI announced its policy on its rate cut.

Another thing is India must define a minimum living wage level to measure economy. While "pure" Economists and Planners go strictly theoretically on the basis of "inflation" as the measure for Economy trend, we are not seeing a different reality that is better understood (especially in a relatively poor country like India), where Real Wages at BoP would show us a more accurate picture of how common people feel. There is also a need to define Minimum Decent Living Wage (MDLW) of an adult in India, and we need to monitor how many do earn at least near about that (or how many do not earn that). This reader has estimated that MDLW in India is Rs. 95,000, and there are over 600 million adults (age above 19) who do not earn even a fraction of this value. Were we to look at our Economy's ability to service the MDLW values, a total Value Addition of over Rs.600 trillion are needed. Alas! Our present GDP is about Rs.190 Tr. What is the point in all these window dressing by RBI through "inflation conundrum"?

One need not look far to learn the RBI's likely decision what with the government nudging it to lower the interest rate. The savings habit is taking a blow by the failure of the banking system to pay interest to keep their savings with the same purchasing power at least, in the future. Further, the government propping up falling entities like IDBI on the one hand and IL&FS on the other hand with different means at its hand leads one to live the present without saving for the future or fall a prey to fly by night operators.