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challenge of inflation

The challenge is to ensure that the benefits of tax cuts reach the common consumer by taking price control measures. It did not happen, So the profits of companies will increase at the expense of the treasury, While inflation will remain the same.

Reserve Bank of India (RBI) Governor Shaktikanta Das has rightly said that it does not take much brain to understand that the RBI will again raise interest rates in June. Now that the European Central Bank (ECB) has also announced a reversal of its policy on interest rates, according to conventional understanding, emerging economies like India are left with no choice but to do so. Until now, the world’s financial and monetary markets were hesitant to raise interest rates by the US Central Bank – the Federal Reserve. The ECB’s policy will now create a new situation. The ECB had adopted a negative interest rate policy since 2014. At present, the interest rate there is minus 0.5 percent. That is, for keeping 100 rupees in the bank, the depositor has to pay interest of 50 paise. But now ECB chief Christine Lagarde has said that this policy will be abolished. It is expected that initially the ECB will increase the interest rate by 0.25 percent next July.

As soon as this news came, the euro, the currency of the European Union region, saw an increase in the price, which had been in a steady decline since the start of the Ukraine war. However, this is a new challenge for a country like India. The result will be that investors will now get another market apart from the US to invest money from here. In such a situation, it is a natural guess for the RBI to move forward on the path of increasing the interest rate. But the real question is, will it help in curbing inflation in India? Shaktikanta Das has said that along with increasing the interest rate, RBI will also announce some financial measures. For example, as the tax has been reduced on petrol and diesel and some imports, similar steps can be taken. The challenge, however, is to ensure that the benefits of such reductions reach the common consumer by taking price control measures. If this does not happen, then the profits of the companies will increase at the cost of the treasury, while inflation will remain the same.

Shubham Bangwal

Shubham Bangwal is a Senior Journalist at Youthistaan.com You can follow him on Twitter @sb_0fficial
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