Unlike the inflation fall in 2014, which was largely on account of softening energy prices, the latest fall has economists asking the question ‘Has inflation targeting gone too far?’ “We’ve got too obsessed with keeping inflation down,” says Abheek Barua, chief economist at HDFC Bank, pointing out that monetary policy for too long was fixated on keeping inflation in check even when growth was slowing down.
According to Barua, there has been a clear shift in the Reserve Bank of India’s stance since Shaktikanta Das took over as governor. In the past, a number like the 4.6 percent CPI number for October 2019 would have promoted calls for a pause in rate cuts. This time, there is still talk of a cut on December 5 when the monetary policy committee meets. That and more liquidity in the system could slowly start to bring inflation back.
First Published: Nov 29, 2019, 19:17
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