The approach of Reserve Bank of India (RBI) to use ‘interest
rate’ as a tool to keep inflation under control should be
reviewed because interest has not only helped regulating
liquidity, but has considerably accumulated Time Deposits and
Broad Money in proportion to Gross Domestic Products (GDP)
during the last 59 years which ultimately cost for sheer loss in
money value. The coins of 1 to 20 paise and notes of 1 and 2
rupee are out of circulation in the market. Today a 5-rupee coin
is used for a purchase which was possible for 50 paise earlier
(say in 1970s). So, in 2010s we may need to use a coin of 50
rupees to get a product we had been purchasing for 50 paise in
1970s. How long we will keep minting coins of high denomination
to counter the inflation and loss in money value? A day will
come when people will not keep hundred rupee notes in their
purses and we have to mint currencies in denominations of
millions only. Since inflation is blamed for loss in purchasing
power of money it is important to understa