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Misguided barriers

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Photo: Mint

The worry, however, is that little will be achieved on inflation, as specific causes of the phenomenon are hard to isolate at this late stage, even as it shows a lack of policy stability, distorts markets and disrupts the profit-maximizing plans of private businesses

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Reverberations of the government’s policy tweaks made on Saturday to help rein in rising inflation were felt on Monday in Indian stock markets, with steel scrips dropping sharply as they reacted to export duties upped on iron ore and imposed on a range of steel inputs. Tata Steel, Steel Authority of India and JSW Steel saw their shares slide.

A global upswing in the prices of ferrous commodities had boosted the export earnings of these firms, but analysts see their overseas market prospects hit hard by the Centre’s action. The aim of discouraging exports was to keep domestic supplies up and prices down. The worry, however, is that little will be achieved on inflation, as specific causes of the phenomenon are hard to isolate at this late stage, even as it shows a lack of policy stability, distorts markets and disrupts the profit-maximizing plans of private businesses. It amounts to a market intervention of the kind top executives were familiar with in the era before liberalization when profits were subject to sudden shifts in operating conditions effected by policymakers. Inflation is for our central bank to tame. Sure, the Centre must also do its bit to help. But item-specific micromanagement is best avoided.

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