We shouldn't restrict our ability to respond: External member of RBI's MPC

The Ukraine situation is a shock both to growth and to inflation, and it is too early to say which of these two shocks will be bigger, says Jayanth R Varma

Jayanth R Varma, the external member of the Reserve Bank of India’s Monetary Policy Committee (MPC), says he doesn’t think monetary policy is ineffective when inflation is driven by supply-side forces. Varma, the only dissenting member of the MPC, tells Manojit Saha why he has not voted for maintaining the RBI’s accommodative stance in the last four policies. Edited excerpts:

With growth yet to revive on a durable basis and inflation expected to come down sharply from the current level, what is the main reason for your voting against the accommodative stance?

There is a very high degree of uncertainty on both