Complex picture: MPC should avoid policy adventurism in uncertain times

The inflation projection of the MPC will ne­ed to factor in such possibilities, which will not be easy, given the level of uncertainty

The decline in the consumer price index-based inflation rate for December is unlikely to bring much relief to India’s economic managers, given the growing policy complications in recent months. The data released on Monday showed that the inflation rate declined to a four-month low of 5.22 per cent, compared to 5.48 per cent in November. Even as a standalone number, the decline is not comforting enough to conclude that the Reserve Bank of India’s Monetary Policy Committee (MPC) will be in a position to start reducing the policy interest rate in the February meeting. A lot will depend on the