Today’s Economist echoes the points I made in yesterday’s blog about the current account deficit, and in previous blogs about fiscal deficits and slowing growth. The story is titled “Turning Sour,” referring to the economy, but the final analysis of the reporter is not all that gloomy. The chart is quite illuminating: it shows the dramatic slowdown in industrial production. The interest rate chart makes the RBI response seem quite anemic. On the other hand, I was reminded of some older work by Vineet Virmani which showed that the RBI’s policy responses make more sense when inflation is measured by a “trimmed mean” index rather than the popular headline WPI. More on that later.
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