Mint Quick Edit | RBI can focus on either growth or inflation without worrying about the other
It’s a dilemma that the Reserve Bank of India (RBI) wouldn’t mind being caught in. The economy’s growth path seems to be on a steady incline with inflation well under control. So, it can choose to focus on either without having to worry about compromising the other.
Ultimately, its policy-rate decision on Wednesday will go by its outlook on relative deviations from an ideal scenario. A wait-and-watch posture would enable it to respond more confidently later, once it has greater clarity on where price levels and GDP growth are headed.
On the other hand, we can’t rule out a quarter-percentage-point rate cut, should RBI decide to act pre-emptively in support of economic expansion before the blow dealt by US tariffs to trade shows up in our data. Since rate moves work with a lag, a case for such action can easily be made.
Besides, RBI may want to back the government’s fiscal stimulus with a monetary one—on the reasoning that while GST rate cuts fire up consumer demand and potentially also business investment, stoking credit offtake would add a financial tailwind to the economy’s momentum. RBI’s main mandate, to be sure, is price stability. But it’s always nice to have choice.
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