Mumbai : High inflation may not be generating the same kind of “unrest” that it used to in the past as rural wages have been rising at a faster clip annually for the past 5 years, Reserve Bank Deputy Governor Subir Gokarn said.
To tame inflation, the Reserve Bank since March 2010 has announced 13 consecutive rate hikes. However, inflation is still above RBI’s comfort levels of 5 % . “Why is high inflation not generating same kind of unrest or outrage that it used to historically?” Gokarn said, adding that “an important answer to this could be that rural wages have actually been rising by about 20 percent annually for the last five years.”
“What that means is despite high inflation, people are actually feeling that they are better-off,” said Gokarn who heads the monetary policy division at the RBI. The headline inflation stood at 7.45 % in October.
During the past five years, the flagship rural employment guarantee scheme has raised the bar for rural incomes. Gokarn, however, said this wage increase, though good from the welfare point of view, has not helped the economy. “We have to see that it is matched by proportionate increase in productivity which can help control inflation,” he said, adding this has hurt the inflation situation as people have started to factor-in inflation.