RBI should adhere to its price stability mandate

Monetary policy is best suited to deliver on price control, just as fiscal policy is best suited to spur economic growth. The central bank must retain its status quo on interest rates for now

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One of the lingering effects of covid—"long covid"—is that economic growth has begun to look a bit like the Sensex, albeit in slow motion. So if GDP growth in the second quarter of 2024-25 surprised on the downside at 5.4%, the lowest in the last seven quarters, 2023-24 was a different story altogether, with second-quarter growth clocking 8.1%. That's the kind of see-saw usually associated with stock markets, not macro numbers like GDP. While the drivers may differ each year, underlying these swings is the "base effect," a consequence of making comparisons with a "base" year, usually the previous one. So, last fiscal year's growth looked rosy in large part because growth in 2022-23 had flagged since 2021-22, when it was 9.7% but on a covid-shrunken GDP base of 2020-21. The same effect will make this fiscal year's expansion look relatively weak.