In defence of RBI

As readers of this column well know, I haven’t had much positive to say in recent years about the monetary policies of the Reserve Bank of India. Central bank policy comes in two areas — exchange rate and interest rates. On both counts, the policy has been mysterious, and questionable. The RBI has consistently changed its goalposts regarding inflation, growth, and the tradeoff between growth and inflation. On exchange rates, in my humble view, it has misunderstood the mechanics of exchange-rate devaluation.

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