The year of useless rate increases

We seem to be in the midst of a scissors crisis. On the one hand, prices are rising; on the other, GDP growth — particularly industrial growth — is slowing down. Joseph Stiglitz, not long ago, argued that raising the interest rate is too blunt an instrument to tackle inflation in a complex economy like India, especially when the final victim is likely to be the growth rate. There is evidence for this in that India has experienced no let-up in rising prices, despite steadily rising interest rates over the past year, and that industrial growth has suffered.

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