Our inflation fight calls for a fiscal pullback too

RBI has reiterated its focus on taming inflation but a key role will also have to be played by the Centre, which must resist overspending and stick to its fiscal glide path at the very least

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The Reserve Bank of India (RBI) under Governor Shaktikanta Das has tended to surprise markets by using tools other than policy rates of interest. In Friday's bi-monthly review, while RBI again left its repo rate unchanged at 6.5% and stuck with its "withdrawal of accommodation" stance, it announced plans to sell government bonds in the open market that made bond players sit up. Last time's heavy freeze of bank cash, seen as an action triggered by its variable rate reverse repo vacuum proving a tad weak, was thought to have plugged gaps in its liquidity control schema. And, at this point of the calendar, before a long poll season, RBI wasn't expected to suck too much money out. With volatile retail prices RBI's focal concern right now, however, hawkish signals of less funds to go around and dearer money than expected sent Indian bond yields up sharply on Friday. As US short-term bonds now yield 5% plus, it's possible that RBI had the rupee's external stability (as linked to asset-related inflows and outflows) partly in mind. But its approach seems d