..........Supply shocks, not excess demand, have powered inflation in India in recent times, so the Reserve Bank of India (RBI), even while reducing demand, has aimed it more at anchoring inflationary expectations. But exactly how this works in the Indian context is not clear. A widely shared perspective, though, is that the RBI reducing its policy rates even marginally would amount to giving up the fight against inflation. But then, growth is also included among the RBI’s objectives. Therefore, giving some weight to growth shouldn’t really imply it is giving up on inflation........
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