My first reaction to last week’s rate cut was that it was too little, too late. But I later felt that there are more serious issues in the thinking of the Monetary Policy Committee (MPC) behind rate setting. Let me start with the minutes of the June meeting of the MPC released in July. Viral Acharya, deputy governor of the Reserve Bank of India (RBI) and a member of the MPC, has been quoted as arguing that “tolerance for a slightly higher real rate of interest is justified to ensure that weak banks do not find relatively low the hurdle
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