Reacting to the RBIs monetary policy, Sinha said finance minister Pranab Mukherjee had met him privately a couple of weeks earlier. He asked me what the finance ministrys view should be regarding the monetary policy. I told him that another hike in rates was not the way to go, he said.
In the last few years, he said, the country had seen an upto 500 basis points increase in rates and all this, he added, had zero effect on taming inflation.
The government, instead of taking a multi pronged appraoch, has abdicated all responsibility to the RBI, which has limited monetary policy devices to tackle these issues, he said.
While initiating the debate on price rise in the last parliament session, I had asked Prime Minister Manmohan Singh to announce the release of at least 1.5 crore metric tonne of grain into the market, which would immediately have a cooling effect on food inflation,he said. He alleged that somebody in the government was in cahoots with commodity traders.
On the monetary policy itself, he said that this coupled with the government's declaration that it was raising budgetary borrowing to R53,000 crore this year would raise fiscal deficit levels to 6%. This gives the economy very little manouvering space especially in the face of a global slowdown, he said. We are worse off now than we were in 2008, he added.
The monetary policy, he declared, would slow down growth and push the economy towards stagflation.