




But as far as gross domestic product (GDP) growth rate is concerned, the first signs of a powering down of the economy were visible roughly a year ago. It was then that the US financial crisis was simmering, interest rates in India had started hurting business sentiment and the growth rate in industrial output was showing signs of stress. But, Inflation expectations were high, and arguably the Reserve Bank of India kept a tight leash on its monetary policy: both the repo rate, or the rate at which the RBI lends to banks, and the cash reserve ratio, or the portion banks have to keep with the RBI, were being hiked to discourage banks from lending. Inflation control, and not growth preservation, was the mantra then: criticised by some and appreciated by others.
For at least the last two months, Prime Minister Manmohan Singh, who is also the finance minister since Sunday, has been talking of counter-cyclical measures or increased expenditure that can act as a powerful stabiliser in times of a global meltdown. In fact, on his way back from Washington DC after the Group of 20 leaders Summit on the World Economy and the Financial Markets on November 15-16, Singh said a falling inflation rate increased the scope for the aggressive use of monetary and fiscal policies to spur growth. It is more than a fortnight since then and inflation has dropped to a five-month low of 8.9 per cent for the week-ending November 9. Expectations are inflation will fall further in the coming weeks, with the government even considering a cut in petrol and cooking gas prices after the assembly polls. In brief, inflationary expectations are more benign than ever.
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