Controlling inflation
This refers to ‘‘Inflation’ shouldn’t exclude food’ (August 16). The RBI’s inflation targeting focuses on core inflation, excluding food and fuel, as it reflects persistent demand-side pressures that can be controlled using tools like the repo rate. Although inflation targeting addresses both demand-pull and cost-push factors, the RBI prioritises core inflation for its long-term impact. In contrast, food and fuel inflation are considered transitory, driven by supply-side factors like government spending, subsidies, and tax adjustments, which are more influenced by fiscal policies and beyond the RBI’s control.
Managing food and fuel inflation may require greater fiscal policy involvement, especially with geopolitical factors driving price fluctuations. Given the spillover of rising food prices into core inflation, it’s time for the RBI to also consider headline inflation when shaping monetary policy, as these shocks are no longer temporary. Rather than placing the entire burden of controlling inflation on the RBI, it is imperative that the government plays a more active role in addressing inflationary pressures through appropriate fiscal measures.
Srinivasan Velamur
Chennai
Thrust of banking
This refers to ‘FM to review PSBs’ performance on August 19’ (August 16). While public sector banks (PSBs) need to be given credit for their stellar performance, it is doubtful whether they have heeded to the Finance Minister’s appeal that they concentrate on fraud prevention pertaining to both large corporate frauds and wilful defaults.
Also, it is time PSBs did away with penalty for not maintaining ‘minimum balance’, passed on the benefit of better rates to small deposits, and focused on the core concepts of banking.
Jose Abraham
Vaikom, Kerala
Curbing household debt
This refers to ‘Is our household debt high or low?’ (August 16). People know their level of income and also future earning capacity, and hence it is imperative that they keep their expenses under control. Educational expenses consume a major portion of their nominal income. Most people want to educate their children in popular schools and colleges, as they are under the illusion that ‘high costs mean high quality’. Often, over-ambitious households are the ones that are indebted. Of course, if the state provides quality education and private institutions are also not avaricious, then there could be financial relief for the poor and the salaried.
S Ramakrishnasayee
Chennai
Ease the path for MSMEs
This is with reference to ‘Woes of MSMEs remain unaddressed’ (August 16). Micro, Small and Medium Enterprises (MSMEs) face numerous challenges that hinder their sustainability. Understanding these challenges is necessary for policymakers, business owners and stakeholders to formulate effective strategies and support mechanisms. The government should play a critical role in creating an environment that is favourable to skill development. Financial incentives like subsidies and tax breaks can motivate MSMEs. The challenges posed by compliance procedures, along with low resources and capacity, also affect MSMEs. The compliance burden has many facets — from tax obligations to labour laws and environmental regulations. Addressing these comprehensively is vital for the sustenance of MSMEs.
P Sundara Pandian
Virudhunagar, TN