The ‘new normal’ is abnormal - A.Seshan

.....There is thus not much difference in the economic situation between now and the last occasion, or even earlier, when the Reserve Bank of India (RBI) undertook a review of its monetary policy. There is, however, one significant and dramatic difference in the thinking of the central bank to reveal that times are indeed changing. Due perhaps to frustration, the central bank seems to be throwing in the towel instead of the gauntlet in its battle against inflation. Speaking at a panel discussion recently, the RBI Governor is reported to have said that he was ready to revisit the ‘ideal’ inflation target of 4-5 per cent, which many feel is too low to attain in the current circumstances. He said: “I am not saying that we would definitely change the number, but we will certainly revisit our strategy.” The psychological danger flowing from the change in the official view on inflation is the consequent damaging effect on the price expectations of the public.......

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