Inevitabilities and allocations

Written by The Financial Express | Updated: May 3 2008, 04:06am hrs
The editorial (Cash crunched, Apr 30) as well as the writeup (RBIs 79-page misreading) pointed out flaws in RBIs policy statement. Since inflation is caused by too much money chasing too few goods, consumption-pushed growth is not sustainable. It can distort the allocation of resources. Luxury expenditure is rising and there is a food crisis. So liquidity reduction was inevitable. The argument that raising cost of credit will penalise only small business is weak. Commercial lending has always eluded smaller businesses. It is laudable that RBI has taken steps to regulate the direction of credit. Increasing the quantum of credit for home loans is also welcome. Rising real estate prices have been acknowledged. It may be a valid assertion that the export lobby has asked for the rupee-dollar peg, but then, every sector from software to commodity trading is guilty of seeking pecuniary gains at the cost of others. Why single out exporters

Subhashree Kishore, New Delhi