A heretic's view of India monetary policy
(A version of the enclosed article appeared in Mint, per link below: https://www.livemint.com/opinion/columns/a-nuanced-monetary-policy-in-a-very-complex-context-11649612421576.html ) A tough context Between the scars of the pandemic and the challenges from the Russia-Ukraine conflict, our economic context is a policymaker’s nightmare. Two years on, economic activity is barely at pre-pandemic levels. Within this, larger companies have done well with increased formalization, even as small businesses have struggled. While contact-based services should now resume, the global backdrop continues to cloud our recovery. Despite anemic growth, CPI inflation has averaged 6.0% over two years, and inflation expectations are in double-digits. Given commodity prices and disrupted supply chains, CPI inflation could well exceed 6.0% during fiscal year 2022-23 (FY23) as well. On employment, notwithstanding shortages in skilled labor, Center for Monitoring Indian Economy (CMIE) suggests that I