Policy prudence

The Monetary Policy Committee of the Reserve Bank of India (RBI) will meet next week to review the policy. Given the state of the economy, the policy decision for the rate-setting committee will not be easy. While the incoming data suggests that the economy is in deep trouble and would need more policy support, inflation based on the consumer price index continues to remain above the target band of the central bank. Prices have not collapsed — as some economists were expecting — because of the lockdown and restrictions on movement to contain the spread of Covid-19. The shutdown and