The Reserve Bank of India has announced a hike in rates in its September quarterly review of monetary policy in the occurrence of the inflation levels not coming down in the coming four weeks. The last time the RBI had increased its repo and reverse repo rates by 25 and 50 basis points respectively. This step will be taken only if inflation continues to be in double-digits.

In the week ended July 24 the inflation a level rose in food items to an annual 9.53 percent, and even though the price of fruits and vegetables were relatively less, they was marginally higher at 9.67 percent.

However, it is expected that the good monsoons will relax the inflationary levels.

In fact, the agriculture output is expected to go up between 4 and 5 percent this year which in turn is expected to dampen the inflationary expectations.

What the RBI is doing to bring down inflation levels is appropriate. Instead of taking big steps it is following smaller ones. The possibility of a super regulator being set up has been brushed aside.