Monetary policy preview: If it ain't broke, don't fix it

Core inflation is falling, and the rupee is stable. But the more pertinent question here is whether there is a need for monetary easing. Let's discuss the key determinants

It’s hard to believe, but true.

For the first time in recent memory, core inflation is falling despite robust growth. The dominant narrative puts it down to a rise in India’s ability to grow, which economists call potential growth.

But some other factors may be at play.

One, China seems to be exporting disinflation. Increases in wages are slowing, and export prices are falling. The Chinese currency has also become far more competitive, so it’s no surprise that China’s export volumes are rising.

India, meanwhile, has ramped up imports of consumer goods and is likely importing some of this disinflation.

Two, commodity prices eased in