......................No central bank, least of all RBI, operates in a political vacuum and the last policy statement is best interpreted as another salvo in the ongoing game of cat and mouse between RBI and North Block (where India’s finance ministry is housed). The deliberate downplaying of latent upside inflation risks and emphasis on the scope for rate cuts provided the appropriate fiscal policy, must be viewed as an understandable, even laudable, attempt by RBI governor Raghuram Rajan to establish a co-operative equilibrium with the new National Democratic Alliance government. Finance minister Arun Jaitley’s budget, delivered on 10 July, however, is likely to have left Rajan underwhelmed. .............
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