...........There will undoubtedly be pressure on the Reserve Bank of India (RBI) to reduce interest rates if inflation continues to decline. Indian companies with too much debt in their balance sheets will likely be at the forefront of these demands. Yet, it should be remembered that India still has very high inflation. A sustainable economic revival is not possible unless inflation is much lower than its current level. RBI governor Raghuram Rajan is absolutely correct when he says that there is no trade-off between inflation and growth at this juncture. (More technically, the sacrifice ratio is zero right now because the function charting inflation and growth is convex rather than a straight line.) It is heartening that finance minister Arun Jaitley has implicitly endorsed this view in his early statements.............
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