Costs of policy convolution

.....So, let us see what is happening. RBI holds interest rates steady. Private sector cost of borrowing does not come down. Public sector borrowing costs are held down by its bond purchases. Further, the public sector garners most of the savings and liquidity with its disdain for restraining spending and spending meaningfully. The government announces a hike in the minimum support price for agricultural produce, while consumer price inflation reigns above 10%. So, what we have is a central bank that cites inflation concerns and holds rates steady, but monetizes the budget deficit in record sums; a government that is supposedly pro-poor, but ensures double-digit inflation with its fiscal irresponsibility; investors (who are they?) who bid up stocks and sell the currency. Even a good criminal novel-writer could not have created such a convoluted set of circumstances, goals and actions......

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