...The “India is unique” argument is intellectually bankrupt. It is the natural response whenever anything is proposed that goes against the status quo. We have to offer better arguments than that, documenting precise reasons why India is different and why it matters. The truth is other countries also have politicians who worry about getting re-elected. And other countries also have poor people who are hurt by inflation. The move to make central banks responsible for inflation management was also an attempt to get the politicians out of the price setting and inflation process. If Brazil, with historically dysfunctional politics and hyperinflation not so long ago, has lower inflation than India today, we may want to ask whether its central bank’s mandate of price stability is precisely what has enabled it to withstand political pressures and achieve the goal. The consensus that maintaining low inflation is the central bank’s job, and its only job, did not develop overnight in those countries, it took time. It is our hope that this consensus will develop in India also. - Raghuram Rajan. More such reading pertaining to inflation in India here:
Posted on: Thu, 17 Oct 2013 05:55:43 +0000
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