RBI hyping inflation: Jagdish Bhagwati
"We seem to have overplayed the inflation angle and there has to be re-balancing now," he told reporters here.
"The growth-inflation dynamic is a perennial problem and you have to go back and forth between the two. You have to balance between the two and also go by common-sense sometimes," the Indian-American economist said.
Between March 2010 and October 2011, RBI had been solely focusing on inflation fighting through 13 rate hikes. RBI has been blaming the high fiscal deficit driven by subsidies for the sticky inflation and asked the government to offer a clear fiscal road map.
Inflation dipped a tad to 7.45 per cent in October but is still above the apex bank's comfort level.
However, more than three years of inflation fighting has not yielded the desired results though it has come down from double-digits primarily due to seasonal factors, it is still hurting everyone, especially growth.
In the October policy, RBI for the second time this year revised upwards its inflation forecast to 7.5 per cent by March-end.
But despite the Finance Minister unveiling a fiscal road map a day ahead of the last policy meet, the RBI refused to bring down interest rates.
While first quarter GDP growth slipped to a decadal low of 5.5 per cent, the latest IIP number showed a contraction of 0.4