The decision by the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) to keep the policy rate unchanged was not a surprise. However, the interpretation of the grounds underlying the decision has led to disagreement, even controversy. There are two issues here. The first is the analytical credibility of the MPC’s approach. The second is public dissonance in the views of the finance ministry and the RBI.
The policy rate is on hold since December 2016. In December, the MPC cited volatility in crude oil prices, financial market turbulence, rising food prices, and uncertainties about the impact
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