Though policy rates have been increased 13 times since March 2010, inflation has adamantly remained in the 9.5 percent-10 percent range over the past 2 years; a clear indication that monetary measures alone are insufficient. The media has publicized the comments from the central banking authorities calling for fiscal steps by the government to combat inflation. Unfortunately, it has fallen on deaf ears and the lack of initiative on part of the government has only aggravated the issue.

Without adequate measures from the government, the Reserve Bank of India (RBI) has limited room to reduce rates. High interest rates do impact growth negatively, but India’s growth story getting derailed also needs to be blamed on the absence of structural reforms.

The research team at fundsupermart.com is of the view that the UPA government, which has not done much in terms of reforms, will continue with its inactive stance for the next few months.