We are facing cost-push inflation: How to remedy?

It is admitted that we are facing cost-push inflation. In such a scenario, would raising interest rates not worsen the overall scenario? 

Our population is growing. Now, if interest rates are allowed to soar, the economy will implode.

Banking irregularities cannot be addressed via fiscal or monetary policy. However, making businesses costlier to operate would definitely lead to further problems. Because, the majority of this economy is being held up by the private sector.

The best way to combat this kind of inflation is to address the supply side, starting with the power sector. However, it seems that while we fail to address the power crisis, we are making it tough to remain competitive as the government tries to do everything except what is required. The government should scrap quick rental and minimum rental agreements. 

The Dollar will continue to appreciate unless we export more so trade policies need to be reformed to help the private sector maintain its competitiveness.

More industries need to be developed other than the RMG sector. More investments in nuclear energy are required.

The government should make renewable energy cheaper to implement by removing or lowering taxes on the technologies. Solar is only being maliciously promoted through easy financing options, but these are not cheap compared to global standards. 

The government should incentivise the ones who have access to investment capital by allowing them to invest in local industries, especially new sectors such as renewable energy and smart manufacturing. Investments without red taping. We know there is a huge black market economy. We need to reel in these funds into the formal economy.

10-year tax holiday should be introduced as a source of investment exemptions in the energy, infrastructure, agriculture sectors. 

Many tough choices need to be made. But do not kill the cow that gives you milk. Our stop-gap reactionary policy is not sustainable.

Ashikul  Hoque is a businessman. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.