The inflation target band is currently 4% plus-minus 2%, but a review is coming up in March 2021. Relaxing it for 5 years may not be a good idea.
When changes are introduced through consultation & engagement, people can get used to new ideas without friction. Bad ones can be dumped; good ones made better.
GDP numbers for Q2 were better than expected, but growth could still be hit by resurgence of Covid. Persistent supply-side inflation is a problem too.
Recent bank failures show that concerns about RBI’s supervisory capacity are relevant. A common feature was RBI allowing problem of bad loans to linger.
India hasn’t signed the RCEP, leading to concerns that it will get isolated. But it’s a China-centric deal that would have few advantages for India’s exports.
PLI scheme focuses on incentivising firms to grow fast, boosting India’s manufacturing & export prospects. But in the long run, sectors need to die and be born.
Scope for manual earth work like digging of canals is limited in cities. An urban MGNREGA might not provide employment and create assets as it’s expected to.
Waiver of interest-on-interest for all during the moratorium can minimise moral hazard. Keeping it selective would've run the risk of hurting credit culture.
While capital controls may be useful in maintaining financial stability, Indian experience suggests IMF should focus on yardsticks of transparency, rule of law.
As the moratorium on loan repayments ends, the government will have to answer the key question about how to treat defaulting borrowers.