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India's giving inflation room to grow to boost growth, but that may bite

India's wholesale price index, which tracks goods at factory gates, rose almost 13% from a year earlier in January.

Photo: Bloomberg
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The RBI is being rather sanguine about future inflation. (Photo: Bloomberg)

Andy Mukherjee | Bloomberg
Inflation is getting a free pass in India. Policy makers seem to believe that by not raising interest rates and letting prices bubble up for a bit they will encourage investment and employment and boost post-pandemic growth. In reality, however, the connection between output, jobs and prices may be more complex. Ignoring inflation may just allow it to bite. 
 
India’s politicians well understand that elections can be won or lost over onion prices. With only 83 million people in salaried occupations in a country of 1.4 billion, households don’t have a lot of bargaining power over wages to cope with

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First Published: Feb 22 2022 | 7:14 AM IST

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