Chairman of ICICI Bank and also the newly appointed chairman of Infosys, KV Kamath spoke to
BT's Suman Layak on inflation, on a day when the Reserve Bank of India tried to strong-arm prices into moderation. Q. What are your views on inflation and how India can manage it? KV Kamath
: I have a simple thought. Inflation
is getting to be difficult. We must all try to understand what the root cause is. There are a few causes: typically one is real estate prices. But this time, the prices in Delhi and Mumbai might be increasing but rest of the country it is not so bad. Next is supply-side shortage: but there is no shortage, especially in manufacturing. You can go and buy anything you want to. Holding is not causing inflation. Food inflation is high, but in ICICI we had done a study on food inflation across 10 countries and 10 food items. We had used purchasing power parity-adjusted basis to measure it. We have in India, probably, the lowest food prices in among those 10 markets. Yes, there is food inflation, but our food prices are not so high.
So, then you come to input prices. But the higher cost of input prices is again a global phenomenon. We need to understand how all the things are playing out. And how do we then assess, for example - interest rate administration is the only medicine that we have. I am actually raising a question rather than answering it. We will have to think this through. If this dose of medicine that has been administered today does not have impact. If it has impact, good. Else, we have to think this through. We say solution to inflation is interest-rate hike, and then we should say no, let us think this through.