India’s new impossible trinity

.....RBI will continue to seek what can clearly be called an ‘impossible trinity’ of three ‘expected outcomes’ – easing liquidity conditions, mitigating downside risks to growth and continuing to anchor medium-term inflation expectations on the basis of a credible commitment to low and stable inflation. And yet, as RBI Governor Duvvuri Subbarao has loudly decried for several years now, most recently in his quarterly monetary policy statement last month, fiscal expansion is inflationary and further complicating its monetary stance. Mr. Mukherjee, are you listening?

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