Why argue when solution is so simple?

India's economic growth has slowed down to the extent that the State Bank of India (SBI) is predicting a growth rate of 4.2% in the second quarter ending 30 September. While demonetization and the Goods and Services Tax (GST) caused major disruptions it is the fault of the economists for recommending the use of monetary policy to keep inflation under control, wrote R Jagannathan. Inflation fell because of a collapse in food and fuel prices so the Reserve Bank (RBI) was wrong to keep "real interest rate very high for a long time, tuning a bad situation worse". The RBI is not an independent organisation, like the Supreme Court of India, but is fully owned by the government of India. Earlier this year the RBI was forced to transfer Rs 1.76 trillion to the government from its reserves, built up over many decades under governments of of different parties. A triumphant Jagannathan wrote that it was RBI's "mea culpa" because of the failure of its monetary policy. "There is little doubt that the Monetary Policy Committee (MPC), under the tutelage of the last governor, consistently overplayed the inflation threat and maintained policy rates at very high levels, thus worsening instability in the financial system." Had the RBI lowered interest rate faster businesses could have borrowed at lower rates to pay off previous loans. This is known as ever-greening of loans which the RBI strongly discourages. This practice has resulted in the build up of bad loans in public sector banks which is why they are not lending, so to suggest that the RBI should deliberately encourage ever-greening to support growth of GDP to help this government is extremely irresponsible. The RBI resisted the transfer of its reserves to the government, because it would be used to as handouts to win the general election in April 2019, wrote Latha Venkatesh. Unable to resist this raid on the reserves, the then Governor Urjit Patel resigned his post. It was this government that set up the MPC to set rates in a transparent manner and set an inflation target of 4%, plus/minus 2%. Probably because politicians saw how the Congress lost because of double-digit inflation in the run up to general election in 2014. Since the government owns the RBI it should disband the MPC and set whatever policy rate it thinks is suitable. Especially since the government quickly appointed a retired IAS officer with a degree in history as the new governor of the RBI. "Critics will latch on to demonetization, whose third anniversary was noted this month, as the key villain in this piece, and they would be right." Indeed. Demonetization led to a flood of cash into banks which was then lent to Non-Banking Financial Companies (NBFCs). The collapse of these companies are creating a severe lack of liquidity. Demonetization and droughts in 2014-15 resulted in a collapse of demand in the rural economy which the government neglected, wrote Prof Himanshu. Instead of writing mendacious articles Jagannathan should ask the government to take over the duty of setting interest rates. Stop unnecessary debate.