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THE TRIBUNE
CHANDIGARH | THURSDAY | 7 JUNE 2018 09

The trilemma of the RBI

rate in a bid to shield the common man from a spike in the prices of food and fuel, though it would also increase the EMIs.
Rajeev Jayaswal
has raised its policy rate for the
first time in about four years.
The move will eventually
prompt lenders to hike interest rates.
The common man will have to bear the
brunt of increased EMIs for purchasing
property or car. Interestingly, pre-empt-
ing the move, some banks had raised
their benchmark rates last week and oth-
ers will follow suit. This is because the
RBI has raised by 0.25 per cent the repo
rate — the rate at which it lends money
to commercial banks.
The RBI's decision would also make
capital costly for the corporates, squeez-
ing margins on their investments.
Investors, particularly in the private sec-
tor, would be forced to revisit their invest-
ment plans. Fresh investment proposals
could be scaled down or postponed,
impacting the growth prospects of econ-
omy. A higher interest rate would also hit
badly the exporters, who have already
been facing difficulties due to high input
costs and geopolitical challenges.
Why did the RBI take a decision that
would hurt both the economy as well as
the consumer? The answer lies in the
mandate the central bank has. The
prime objective of the RBI's monetary
policy is to maintain "price stability".
The job of the central bank is to shield
millions of poor Indians from a spike in
the prices of food, fuel and other con-
sumables. The bank, therefore, main-
tains that the "price stability is a neces-
sary precondition to sustainable growth."
monetary policy review press conference in Mumbai on Wednesday. PTI
The RBI uses several instruments,
including the repo rate and the reverse
repo rate, to manage money supply in the
economy to check inflation.
The bimonthly monetary policy of the
RBI is a tightrope walk. It is essentially a
trilemma where the Monetary Policy
Committee (MPC) has to juggle with
three key elements — inflation, growth
and currency. Apparently, in the present
circumstances, all the three are incon-
gruous. Inflation is going north; the econ-
omy is yet make a complete recovery of
8.2 per cent (the level before demonetisa-
tion) and the rupee has significantly
weakened against the dollar.
Most of the economic analysts and mar-
ket enthusiasts were in favour of the RBI
maintaining a status quo and giving a
chance to growth for two more months.
They were fully aware that the constant-
ly rising inflation that had surpassed the
4 per cent comfort zone was a cause of
worry, but they had hoped that the RBI
would wait and see the impact of an
expected good monsoon before tinkering
with the interest rate as inflation was
nowhere around the alarming level.
Instead of taking the risk and raising
the repo rate in August, the RBI decided
to rein in inflation without further delay.
One of its biggest worries seems to be
the high import cost of crude oil. "Crude
oil prices rose sharply till May 24 on
heightened geopolitical tensions," the
RBI statement said after the MPC meet-
ing on Wednesday. Although crude oil
prices have softened and the US has
advised the Organisation of Petroleum
Exporting Countries (OPEC) to raise
supply, the rates are still high for a coun-
try like India, which imports more than
80 per cent of the crude oil it processes.
A sharp rise in retail inflation that had
risen sharply to 4.6 per cent in April has
been the major cause of worry for the RBI.
Even after excluding the estimated
impact of an increase in house rent
allowance for central government employ-
ees, headline inflation was at 4.2 per cent
in April, up from 3.9 per cent in March.
The food inflation was, however, moderate
for the fourth successive month because
of low prices of vegetables, pulses and
sugar. But the rising prices of other food
items such as cereals, fruits, readymade
meals, meat and fish were a matter of con-
cern. It appeared that the RBI decision is
also based on its own survey conducted
last month that showed "a significant rise
in households' inflation expectations."
The RBI has tried to justify the rate
hike by citing examples of other Asian
economies. While China, the Philip-
pines and Indonesia have recently
raised their benchmark rates, the US
Fed is expected to hike the interest rate
in its next policy meeting.
The rate hike would slow economic
growth. Even details provided by the
central bank show that the state of the
economy is not in good shape and it is
facing some serious headwinds. While a
seven-quarter high growth rate of 7.7
per cent in January-March 2018 indi-
cates that the economic recovery is tak-
ing place, this growth should be seen in
the context of a low base effect of 6.1 per
cent for the corresponding quarter of
the preceding fiscal year.
The RBI has increased the policy rate
and kept the stance "neutral". This is a
sign of hope as well as despair. The dev-
il is in the detail, which will be decoded
only after the RBI publishes the min-
utes of the MPC on June 20.
rajeevj.tribune@gmail.com

A tightrope walk for Rajnath in J-K

Arun Joshi
has any Union Home
Minister visited Jammu and
Kashmir with so much appre-
hension in the air as Rajnath
Singh does when he lands in Srinagar
today. His visit is marked by unique
challenges.
The May 16 announcement of the halt-
ing of operations during the holy month
of Ramzan and the subsequent call for
talks with the Hurriyat Conference (HC)
and Pakistan have inspired mixed emo-
tions. The Valley is looking forward to a
consolidation of what the BJP’s ruling
alliance partner and Kashmir-centric
PDP calls moves to strengthen the con-
stituency for peace and dialogue. But a
majority of the Hindu population in the
Jammu region, that is at the receiving
end of the firing and shelling from
Rajnath Singh. TRIBUNE PHOTO: MUKESH AGGARWAL (FILE)
across the border, is in no mood to
accept any move that appeases terror-
Rajnath Singh has no ists and secessionists.
pre-determined line to Ever since militancy broke out in
Kashmir in 1990 — in its most danger-
walk on to stem the ous form, it saw the ethnic cleansing of
Kashmiri Pandits and a storm of anti-
unrest and violence India violence — the home ministers of
and achieve peace in all regimes have visited the Valley. But
they have never had the challenge of
Kashmir because courting peace in one region while
none of his ignoring the Jammu constituency that
wants stern action against terrorism.
predecessors has had Rajnath Singh has no pre-determined
to maintain such a line to walk on to stem the unrest and
violence and achieve peace in Kashmir
had to maintain such a delicate balance
in the past 30 years. Perhaps, none of
them had seen the kind of street
protests, killings, bloodshed, pellets,
bullets and stones in the Valley that
Rajnath has seen from close quarters.
It has been particularly so after the
July 8 killing of Hizb commander
Burhan Wani, whose memory is being
kept alive by secessionists and the
mainstream alike.
The first week of Ramzan injected
optimism as it was relatively peaceful
in the Valley. The general public, partic-
ularly in South Kashmir — that is the
epicentre of the new-generation mili-
tancy — felt that something should be
done to cultivate peace. It was sowing
time in Kashmir and the people wanted
the seeds of peace to bloom. They dis-
agreed with those who defined cease-
fire as a period which granted freedom
to militants to roam freely. Their mood
brightened further when the Home
Minister called for talks with the HC —
by naming the separatist conglomer-
ate, though there are many others too
now — and Pakistan.
The Pakistan-Hurriyat-Kashmir trian-
gle has a special appeal in Kashmir. It
translates into the Government of India
being realistic and accepting that there
are internal and external dimensions to
the Kashmir issue. Ironically, this selec-
tive reality applies only in the case of the
Indian part of Jammu and Kashmir. For
the other parts of the erstwhile united
state of Jammu and Kashmir, occupied
ed to China, the separatists and others
believe that the issue is settled.
The situation is complex and it would
not be easy for the Home Minister to
take the bull by the horns. His feet are
tied to the fire of Hindu nationalism
wherein any possibility of a handshake
with the Hurriyat is seen as not only
appeasing to the secessionist sentiment,
but also a humiliation to the Indian
nation. It was summed up by Minister of
External Affairs Sushma Swaraj as
"there can be no talks when the body
bags (of soldiers) reach their homes."
On a wider canvas, Rajnath is expect-
ed to do an evaluation of the situation. It
would be a mistake if he restricted it to
the period since May 16, this year. That
is just a glimpse of what might happen if
the issue is not tackled wisely. It would
again be a mistake if the decision of the
peace process is taken in the backdrop
of the limited period in which the cease-
fire experiment has been undertaken.
Politics is a game of negotiating and re-
negotiating uncertainties. Kashmir is
that uncertain terrain.
But in this uncertainty, there is one
certain fact: each time there is a cease-
fire-like initiative, militants regroup
with increased lethality. They use
their deadly power of guns and
grenades to smash peace. They don' t
want anyone to sit across the table for
talks without their consent and when
they suffer, they are owned by the very
same set of people whom they scare.
This defines the relationship between
are so many groups, each with their
localised agendas. They rule their
respective places as fiefdoms and are
hostile to the idea of one-size-fits-all.
At the same time, there is a situation
wherein the civilian involvement, that
was sought to be discouraged through
the halting of operations, has resur-
faced. Scenes of stone-throwers chas-
ing security vehicles, and in the
process suffering casualties, give a
dangerous look to the situation.
One question always bogs down the
security forces: what if the peace ini-
tiatives serve as an incentive to mili-
tants to go in for major attacks? The
experience is bitter on this count. The
forces can deal with militants, but
when dealing with civilians and stone-
-throwers, it turns against them. Their
worst criticism comes from the nego-
tiators who see themselves as a Henry
Kissinger or a Richard Holbrook. They
want to hide the reality and present a
rosy picture to prove that they are suc-
ceeding in their efforts. That is typical
frozen thinking. Some do it by seeking
amnesties for trouble-makers, and
when things backfire, they blame it on
events beyond their control.
The Home Minister will have to care-
fully tread on this minefield where
chances of missteps are more than
right steps. However, this fear should
not hold him back from taking steps
which he deems are in national interest
in the long term.

delicate balance. because none of his predecessors has Pakistan and some of the territory gift- the separatists and militants. There ajoshi57@gmail.com

on this day... 100 years ago su do ku forecast

YESTERDAY’S V. EASY
SOLUTION
Across
1 Sombre, 4 Two-
9 3 4
Lahore, Friday, June 7, 1918.

Undesirable Methods.
faced, 9 Munich, 10
Stand out, 12 Teak, 5 7 8 9 3
13 Bigot, 14 Pine,
2 1 6 4
WE associate ourselves whole-heartedly with the protest in the name 17 Multilateral, 20 Chandigarh 39 24
of decent journalism by the Bombay Chronicle against “the unedi- Heart and soul, 23 New Delhi 40 28
fying discussion and revelation of confidential political conversa- Lead, 24 Seamy, 25
tions on the occasion of the war conference at Delhi which have been Star, 28 Reserved,
29 Loving, 30
2 9 5 3 Bathinda 44 24
appearing in the columns of the Marhatta.” In its latest article the
3 4 8 6
journal beats its own record in this painful matter. In a previous issue Dynamite, 31 Jalandhar 42 22
Invert. Ludhiana 42 23
it had published a statement insinuating that Pandit Madan Mohan
Malaviya was influenced by the Maharaja of Gwalior in his refusal to Patiala 41 25
sign the letter to the Viceroy on the self-government resolution. Pan-
Down
1 Sometime 2 8 7 1 2
dit Malaviya has stated that the Maharaja's visit had nothing to do Manually, 3 Rock,
with his own refusal to sign the paper. After this only two courses
were open to the journal, either to substantiate its previous state-
5 With open arms,
6 Funk, 7 Chopin, 8
2 8 3 7 Bhiwani
Hisar
43
44
27
26
ment, or to withdraw the statement and express its regret. Dither, 11 Karnal 39 22
Disagreement, 15
Libel, 16 Hardy, 18
4 6 8 7 5 Sirsa 44 23
Punjab Publicity Board.
1 5 6
Doctrine, 19 All
AT a meeting of the Punjab branch of the Press Association of right, 21 Florid, 22
India held in the Tribune office on Wednesday morning, with Babu Damson, 26 Grim, Manali 26 13
Kalinath Ray, provisional President in the Chair, the following res- 27 Down. Nahan 35 20
olution was unanimously adopted:-This meeting of the Punjab Yesterday’s solution Shimla 27 17
branch of the Press Association of India desires to enter its strong 19 Renown (4) 5 Profitable (8) 9 5 4 7 2 8 1 3 June 7, 2018 Thursday Solan 33 19
and emphatic protest against the introduction of the principle of 22 Cook in oven (5) 6 Ruin (7) Vikrami Samvat 2075
7 4 3 1 5 8 9 6 2
communal representation in the matter of the representation of the ■ Shaka Samvat 1940
9 Pariah (7) 23 Muslim (7) 7 Poor consolation (4,7) 1 2 8 3 6 9 7 5 4 ■ Jyeshtha Shaka 17
Indian Press on the Punjab Publicity Board, which has had the Jyeshtha Parvishte 25 Leh 27 15
effect, among other things, of depriving the Board of the advice
10 Sequence (5) 24 Freeze for preservation (11) 8 Overcome formality (5,3,3) 3 8 6 7 1 4 2 9 5 ■
■ Hijari 1439 Srinagar 38 18
and active co-operation of the Indian-edited English Press. By 11 Unpleasantly moist (4) 13 Terrible accident (8) 9 1 7 2 3 5 6 4 8 ■ Krishan Paksha Tithi 8
up to 12.37 pm
another resolution the President was authorised to communicate 12 A glazed pottery (8) 15 Paved area by house (7) 4 5 2 8 9 6 3 7 1 ■ Priti Yog up to 11.05 pm
this resolution both to the local Government and the Government 14 Set of clothes (6) 17 Having vision (6) 2 7 9 5 8 1 4 3 6 ■ Purvabhadrpad Nakshatra
Mussoorie 23 14
up to 10.05 pm
of India. This was done immediately after the meeting. 16 Move about restlessly (6) 3 Undiluted (4) 20Allow scope for (5) 5 3 4 6 2 7 1 8 9 ■ Moon enters Pisces sign Nainital 24 16
18 Abandoned (8) 4 To catch (6) 21 Aspersion (4) 8 6 1 9 4 3 5 2 7 at 3.43 pm TEMPERATURE IN OC

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