Synchronize policies to counter weak growth and high inflation
Live MintThere is a wide consensus that India’s gross domestic product will grow at 7%-7.5% during 2022-23. Though mainly driven by high food and energy price inflation, high headline inflation also reflects elevated inflation across a wide range of non-food, non-fuel core inflation components. Apart from domestic inflation, RBIs policy stance also takes into account other factors, in particular global supply disruptions, high inflation and rising policy rates in the US and other advanced countries. Given the backdrop of low growth along with high inflation, and with RBI now focused on containing inflation, what should be the policy stance of the government? In other words, following the Tinbergen rule, the monetary and fiscal policy instruments should be separately assigned to address the two conflicting policy goals of containing inflation and reviving growth.