Monetary policy isn't a popularity contest

If the RBI cuts interest rates now, it will prolong the much-needed macro adjustment

 

......The RBI’s approach of not being wedded to a particular rupee level and sensibly avoiding its senseless defence by running down foreign exchange reserves has saved us so far from a bigger disaster. I know it is difficult for people, including some economists, to think of massive exchange rate depreciation as being positive, but in the kind of the macro cross-currents India finds itself, currency weakness is part of the solution, not part of the problem......

.......Frankly, the RBI should not be in the business of doctoring financial markets’ mood to make up for the government’s inaction and incompetence by ignoring the over 10 per cent consumer inflation just before an uncertain monsoon. If it attempts to do that by responding under political pressure, or as if in a popularity contest, or as a prisoner of market expectations, it’ll only be contributing to the very macro instability due to entrenched inflation it is trying to address.

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