Who cares about monetary policy?4 min read . Updated: 20 Jul 2017, 04:56 AM IST
If monetary policy does not provide relief in terms of a rate cut for some reason, fiscal discipline will have to be given up
The Reserve Bank of India (RBI) will announce monetary policy in less than two weeks’ time. There is already speculation about the official rate of interest, essentially based on information about softening of the inflation rate. Movements in both the Consumer Price Index for all items (CPI) and Whole Price Index (WPI) show declines much below the average inflation target of 4%. In the circumstances, it is no wonder the chief economic adviser to the ministry of finance (MoF), Arvind Subramanian, has strongly pitched for a rate cut. Bank of America-Merrill Lynch strongly favours rate cuts. A number of other commentators have taken the same position. However, the amount of rate cut is not under any serious discussion at this point in time.