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ON A HIGH

The finance minister has asserted that the government is sovereign in the choice of inflation: that it can choose any inflation target that it likes, and that it is the duty of the Reserve Bank of India to use its instruments to achieve it. The outgoing government has gone about generating uncomfortably and unwisely high rates of inflation, and thereby established its right to inflate de facto, if not de jure. It may seem odd that he should claim a right that he has exercised without any self-restraint. He chose to point out the sad but irremediable reality at this point because a committee headed by a deputy governor of the RBI dared to propose something different. The Urjit Patel committee proposed that inflation should be brought down drastically, and that the RBI should do so by setting progressively decreasing inflation targets until it achieved a long-term mean.

Its suggestion seems to have caused discomfort to P. Chidambaram on two counts. First, it wanted the RBI to be primarily responsible for bringing down inflation and keeping it low; and second, the target it proposed was so much lower than what the finance minister achieved and seems content with. Mr Chidambaram is a well-travelled man, so he probably knows where Mr Patel is coming from. It is the general belief across all countries other than autocracies that the Central bank should be primarily responsible for achieving low inflation, and that it should go about its task without any interference from the government. Mr Chidambaram is clearly in disagreement with this norm; and it cannot be because it violates government sovereignty. Governments everywhere are sovereign; but elsewhere, they are also responsible, and choose to aim at low inflation. Indiaís finance minister finds such a responsibility deeply unwelcome; and he must do so because he prefers much higher and unrestrained rates of price increase than any reasonable Central bank would choose. He practises what he preaches, for he has achieved such high rates during his tenures; he savoured the indiscipline, and wants the freedom to enjoy it in the future, in the event of his ending up again as finance minister or even higher after the general election.

This reflects a certain degree of optimism regarding the outcome of the coming election, for the portents are not very favourable to Mr Chidambaramís party. At least, that is the assessment of those of his party men who are rushing to queue up before the leaders of competing parties for parliamentary candidatures. But Mr Chidambaram is not the most alarming spectre India faces; if the country ends up with a government of another party or jerry-built coalition, it may see even worse financial indiscipline than Mr Chidambaram has displayed. However much they may wish it, the people are unlikely to see a lower rate of inflation under the next government.