The Reserve Bank of India (RBI) is facing a difficult task of balancing growth and inflation control. Recent data shows a slowdown in real growth and a rise in October CPI inflation to 6.21%, the highest in 14 months.

The Monetary Policy Committee (MPC) has decided to keep the current rates unchanged, citing strong private consumption and investment. However, there are concerns about persistent inflation, leading government officials, including the commerce and finance ministers, to call for a reduction in policy rates.

Despite arguments that high borrowing costs hinder credit uptake, there has been a surprising surge in credit growth, with increases of 15% in 2022-23 and 20% in 2023-24 following a 250 basis point hike in policy rates. This paradox raises questions about the effectiveness of current monetary policy and its impact on economic drivers, as officials continue to debate the best approach to stimulate consumption and investment while managing inflationary pressures.