Two recent pieces of news are likely to cause some concern to those thinking hard about India’s economic recovery and its return to a high-growth path. The first is word from the southern hemisphere: the central bank of Australia has taken the plunge, becoming the first G-20 economy to raise short-term interest rates. In an environment where influential voices in economics have started worrying about an exit strategy from loose money, this might be viewed by some within India’s monetary policy establishment as a sign that India’s own monetary stance could do with a change. The policy establishment will be similarly tempted to tinker in the foreign exchange market, if history is any guide, given the news that the rupee’s price vis-à-vis the dollar is responding strongly to uncertainty about the Reserve Bank of India’s future policy stance.

But responding in this manner would be a decided error. The point has been made, and the argument won, that — particularly in this time of crisis — the RBI risks too much if it tries to do too much. It must not attempt to intervene to protect India’s currency, or the special interests of either its exporters or importers. Instrumentally, of course, an appreciating rupee is easier for the RBI if it is looking for a reason not to raise interest rates until the contraction of external demand eases.

But is the RBI looking for such a reason? It would be useful if it were. After all, the conditions in each G-20 country are different; and India’s interest rates remain high by world standards, and the sources of any conceivable inflationary pressure in India are distinct from what they might be elsewhere in the world. Lessons on the timing of monetary policy exit strategies therefore need to be drawn with care. But the fear is that the institutional culture of the RBI will not allow such sensible thinking to come to the fore. The RBI governor recently spoke in Istanbul, and though he made the requisite noises about how inflation was a concern, he also said that India’s recovery to a sustainable high-growth path would not be held hostage to an “exit strategy”.