Just a few days before the monetary policy announcement for the first quarter of 2012-2013, the Reserve Bank of India Governor D. Subbarao chose to talk about the centrality of inflation. The occasion was the launch of the collected writings of one of his illustrious predecessors, the late I.G. Patel. He quoted Patel, saying that the supreme test of monetary policy was its ability to check inflation without hurting growth. Notice the sequence. Implicit in this formulation (Patel’s, not Subbarao’s) is that inflation control is the objective, and not hurting growth is the constraint. You can’t switch the objective and the constraint. Of course, there is no such single objective mandate given to the RBI. But the RBI watchers would be deluding themselves if they don’t attach a higher weight to inflation control in the RBI’s current priorities............
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