It is no secret that industry hates sound monetary policy, which tightens when inflationary pressures loom and loosens when inflation is quiescent. This inherent conflict of interest between fiscal and monetary authorities is at the core of the rationale for an independent monetary policy. It also is self-evident that economists, commentators and journalists, who typically tend to shillfor industry, government or both, are likewise advocates of low rates, the inflationary consequences be damned. It is salutary to remind ourselves, therefore, that inflation-targeting has been a rip-roaring success in India. The joke is that those who say we don’t need inflation-targeting because inflation is already low have got things completely backward: The truth is we now have low inflation because of inflation targeting, not in spite of it or just through sheer luck.

Source: Mint June 02, 2019 17:48 UTC