FE Editorial : Very reserved
D Subbarao was ‘guided’ by the central bank’s ‘old guard’ into not cutting key rates in the October 24 policy review. There have also been reports that RBI’s subsequent action was prompted by government intervention. Group-think in RBI seems to be centred around the proposition that India was and remains inflation prone and that monetary easing now will undo the ‘good work’ of conservative policy. The dangerous thing about this, to paraphrase Keynes, is that RBI’s policy staff are not letting their minds change even though facts have changed. Post-crisis, plenty of people—especially efficient market/minimal government advocates—are abandoning group-think and looking for heterodox solutions. RBI may have had ‘facts’ to support its monetary hardline thesis earlier—even this is debatable, however; this newspaper contested it—but clearly there’s evidence now requiring a change of stance. It seems though
Be the first to comment.