Saturday, June 21, 2008

Yeah, That'll Do It

From The Hindu:
...the general apprehension is that of yet another bout of monetary policy tightening by the RBI - which could lead to increases in lending rates with respect to automobile, housing and consumer loans.
New loans will become dearer, alright, but how's this going to have a direct bearing on the family budget? OK, I get it, below-poverty-line families thinking about buying a car, a house, or a flat-screen TV will balk at the high EMIs, and will therefore have more disposable income to spend on luxuries like food, thereby offsetting the pinch of higher prices. Bottom line is, this will not have a first order impact on inflation: the fuel prices hike is too much of a countervailing force on the other side.

On a side note [*], now that the inflation rate has reached truly alarming levels, the captains of industry have woken up. Not out of concern for the common man, but about sustaining economic growth:
Inflation is not only a concern for the government but also a concern for the industry.. [the unabated rise in prices] reduces the space for fiscal and monetary policy maneuverability without seriously impacting growth.
[*] Come to think of it, the concern over a rise in lending rates for say, flat-screen TVs, actually ties in with the worry about sacrificing economic growth. Silly me.