Limited headroom

.....The budget had stressed fiscal consolidation, which the RBI has been asking for, as an essential complement to the anti-inflation stance of its monetary policy. So irrespective of whether the revised fiscal road map — which among other signposts calls for the ratio of gross fiscal deficit to GDP to decline to 4.8 per cent in 2013-14 — can in fact be reached, the RBI was forced to act. However, even without the government’s prompts, the RBI has not ignored growth concerns. Recent policy statements have, in fact, shifted the RBI’s focus away from inflation towards growth. As so often in the past, the mid-quarter review explains why monetary policy has to balance the conflicting claims of growth and inflation.......

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