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THE TRIBUNE

CHANDIGARH | THURSDAY | 7 JUNE 2018

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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

Rajnath Singh. TRIBUNE PHOTO: MUKESH AGGARWAL (FILE)

Rajnath Singh has no pre-determined line to walk on to stem the unrest and violence and achieve peace in Kashmir because none of his predecessors has had to maintain such a delicate balance.

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 across the border, is in no mood to accept any move that appeases terror- ists and secessionists. Ever since militancy broke out in Kashmir in 1990 — in its most danger- ous form, it saw the ethnic cleansing of Kashmiri Pandits and a storm of anti- India violence — the home ministers of all regimes have visited the Valley. But they have never had the challenge of courting peace in one region while ignoring the Jammu constituency that wants stern action against terrorism. Rajnath Singh has no pre-determined line to walk on to stem the unrest and violence and achieve peace in Kashmir because none of his predecessors has

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 Pakistan and some of the territory gift-

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 the separatists and militants. There

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.

ajoshi57@gmail.com

on this day

100 years ago

Lahore, Friday, June 7, 1918.

Undesirable Methods.

WE associate ourselves whole-heartedly with the protest in the name of decent journalism by the Bombay Chronicle against “the unedi- fying discussion and revelation of confidential political conversa- tions on the occasion of the war conference at Delhi which have been appearing in the columns of the Marhatta.” In its latest article the journal beats its own record in this painful matter. In a previous issue it had published a statement insinuating that Pandit Madan Mohan Malaviya was influenced by the Maharaja of Gwalior in his refusal to sign the letter to the Viceroy on the self-government resolution. Pan- dit Malaviya has stated that the Maharaja's visit had nothing to do with his own refusal to sign the paper. After this only two courses were open to the journal, either to substantiate its previous state- ment, or to withdraw the statement and express its regret.

Punjab Publicity Board.

AT a meeting of the Punjab branch of the Press Association of India held in the Tribune office on Wednesday morning, with Babu Kalinath Ray, provisional President in the Chair, the following res- olution was unanimously adopted:-This meeting of the Punjab branch of the Press Association of India desires to enter its strong and emphatic protest against the introduction of the principle of communal representation in the matter of the representation of the Indian Press on the Punjab Publicity Board, which has had the effect, among other things, of depriving the Board of the advice and active co-operation of the Indian-edited English Press. By another resolution the President was authorised to communicate this resolution both to the local Government and the Government of India. This was done immediately after the meeting.

OPEDJuggling with three key elements — inflation growth and currency — the Monetary Policy Committe has raised the repo

ACROSS1 Antarctic volcano (5 6)

UTTARAKHANDDehradun 32 22

NEVER

calendar

DOWN2 On many occasions (5)

SUNSET:THURSDAYSUNRISE:FRIDAY 19:2405:19 HRSHRS

quick crossword

HIMACHALDharamsalaPRADESH32 23

PUNJABAmritsar 42 22

HARYANAAmbala 39 27

6 THERBI GovernorRBI DECISION:Urjit Patel (C) Deputy Governor Viral Acharya (L) and Executive Director Micheal Patra (R) at the post-

JAMMUJammu & KASHMIR40 30

THE Reserve Bank of India (RBI)

SunnyCITY Partly CloudyMAXCloudyMIN Rainy Foggy

YESTERDAY’S

SOLUTION

Across

1 Sombre, 4 Two-

faced, 9 Munich, 10

Stand out, 12 Teak,

13

Bigot, 14 Pine,

17

Multilateral, 20

Heart and soul, 23 Lead, 24 Seamy, 25 Star, 28 Reserved,

29 Loving, 30

Dynamite, 31

Invert.

Down

1 Sometime 2

Manually, 3 Rock,

5 With open arms,

6 Funk, 7 Chopin, 8

Dither, 11 Disagreement, 15 Libel, 16 Hardy, 18 Doctrine, 19 All

right, 21 Florid, 22 Damson, 26 Grim,

27 Down.

 

19

Renown (4)

5

Profitable (8)

22

Cook in oven (5)

6

Ruin (7)

9

Pariah (7)

23

Muslim (7)

7

Poor consolation (4,7)

10

Sequence (5)

24

Freeze for preservation (11)

8

Overcome formality (5,3,3)

11

Unpleasantly moist (4)

13

Terrible accident (8)

12

A glazed pottery (8)

15

Paved area by house (7)

14

Set of clothes (6)

17

Having vision (6)

16

Move about restlessly (6)

3

Undiluted (4)

20Allow scope for (5)

18

Abandoned (8)

4

To catch (6)

21

Aspersion (4)

su do ku

V. EASY

 

9

3 4

 

5 7

8

9 3

2

1

6 4

2

9

5

3

3 4

8 6

8

7

1

2

 

2 8

7

3

4 6

8

7 5

 

1

5 6

Yesterday’s solution

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June 7, 2018 Thursday

Vikrami Samvat 2075

Shaka Samvat 1940

Jyeshtha Shaka 17

Jyeshtha Parvishte 25

Hijari 1439

Krishan Paksha Tithi 8 up to 12.37 pm

Priti Yog up to 11.05 pm

Purvabhadrpad Nakshatra up to 10.05 pm

Moon enters Pisces sign at 3.43 pm

forecast

Chandigarh

39

24

New Delhi

40

28

Bathinda

44

24

Jalandhar

42

22

Ludhiana

42

23

Patiala

41

25

Bhiwani

43

27

Hisar

44

26

Karnal

39

22

Sirsa

44

23

Manali

26

13

Nahan

35

20

Shimla

27

17

Solan

33

19

Leh

27

15

Srinagar

38

18

Mussoorie

23

14

Nainital

24

16

TEMPERATURE IN O C