JAYANTH R VARMA, one of the members of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), says the stance of ‘withdrawal of accommodation’ can only refer to rise in the repo rate. “When meeting after meeting ends with a resolve to raise rates, but does not actually do so, that creates a dissonance between words and deeds,” he says. Varma, Professor of Finance and Accounting at Indian Institute of Management- Ahmedabad, tells HITESH VYAS and GEORGE MATHEW that though bringing inflation below the upper tolerance band is required, there is a need for being more patient when it comes to gliding inflation to the 4 per cent target. “A more rapid pace of reduction could impose an intolerable growth sacrifice,” he says. Edited excerpts:
You have said there is a disconnect between policy stance and action, which does not enhance the credibility of the MPC. Can you elaborate further on it?
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