India’s policy makers may have erred on price management policies that were premised on inaccurate inflation projections hurting the government’s credibility, Planning Commission deputy chairperson Montek Singh Ahluwalia said on Sunday.
“It’s absolutely true that we have been hoping that this (fall in inflation) would happen earlier and to that extent our credibility becomes questioned,” Ahluwalia told Karan Thapar in an interview for CNN-IBN’s TV programme ‘Devil’s Advocate’.
“We should recognise that short-term forecasting is subject to error. By February you will have the January data and if it turns out that inflation is not coming down by then, we really don’t know what we are doing,” he said.
Ahlulwalia’s remarks, perhaps mirrors the general sense of helplessness among government’s macro-managers caught in a prolonged tug-of-war between sliding growth and rising inflation.
Inflation has remained stubbornly high and stood at above 9% for the last six months despite a slew of monetary and fiscal measures. It was 9.73% in October.
The Reserve Bank of India has raised the repo rate—the rate at which banks borrow from RBI—13 times in the past 19 months to stymie demand and cool prices.
“The government is certainly worried about inflation. It’s true that inflationary pressure is higher than what we had thought it would be. The RBI has taken a number of steps. It’s too early to say it’s not having an impact. All the research shows that monetary tightening takes at least 3-6 months. Maybe by the end of the fiscal year, you will see inflation coming down,” he said.