It happens to all of us sometime or the other. We make what we think is a considered and cautious decision only to discover that we have been too conservative. Like buying that 800 sq ft flat when the rates were 7 per cent and kicking ourselves when we could have done 1200 sq ft then, now that rates are 9.5 per cent. Then there are times when we get liberal in our new found confidence and regret the extravagance. But such luxuries of miscalculation are not available to Central Bankers. The stakes are not only about making decisions that have billion rupee implications for a billion people, but also about being held responsible for altering the course of GDP growth for a large country. That makes RBI the conservative central bank it is, like most Central Banks of the world. This credit policy review is not about interest rates, it is actually about a Central bank pondering aloud about the right stance — and choosing to move away from being too conservative.

The monetary and credit policy review swings between the two extremes in both straight forward and subtle ways. There is the lauding of GDP rates and the projection that it can be even better. There is the admission that growth has been better than projected on all fronts. So you expect to see them say that the bank will do all it takes to encourage this growth and not scuttle it with another rate hike. Not clearly so. Tagged along the projections is the emphasis that inflation expectations have to be ‘anchored’. There is the optimism that investment is happening and efficiencies are increasing. There is the subtle hint that there may not actually be ‘overheating’ because it is tough to measure it in an economy like India. The increase in asset prices is a fear, but there may not be a bubble yet.

... contd.