Maintaining the balance

MPC has enhanced the scope of policy debate

The first meeting of the reconstituted monetary policy committee (MPC) raised several important issues and enhanced the scope of policy debate. Economic conditions in India are perhaps more complicated at this stage than in other large economies. Inflation is running above the central bank’s tolerance band for several months and could remain elevated in the near term even as the economy is expected to contract by about 10 per cent in the current fiscal year. High inflation is not allowing the rate-setting committee to reduce interest rates further to support economic activity. It is in this context that the views