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RBI State of the Economy Report: The Maya of Inflation and the Leela of Growth

Inflation is transitory, as are all things, while growth will depend on our karma

August 18, 2021 / 05:58 PM IST

From the RBI Bulletin for August 2021—State of the Economy report:

Exhibit 1: ‘This edition of the State of the Economy coincides with the fourth month of the Shalivahana Shaka – the Indian national calendar – when the south west monsoon stretches its embrace across India. It is a time of sacrifice and fasting, and of the celebration of material creations, especially water. It is the season of mists and mellow fruitfulness, its music drowning out the songs of spring.

Exhibit 2: ‘Sravana 2021 is also a time of the year when the Reserve Bank connects with the transcendental calm within. Submersed in this inner stillness, it looked beyond the dilemmas and trade-offs in the here and now to contemplate the world of tomorrow.’

Exhibit 3: ‘The first impulses of the recovery have arrived, riding on thunder and lightning as the monsoon intensifies’.

We bring you a few FAQs on the RBI’s state of the economy report for the month, while trying our best to stick to the spirit of the quotes above:

Q: What is the RBI’s current reading of growth and inflation?

A: Let us contemplate the blessings the monsoon showers on us. We at the RBI are singing Raga Megh Malhar with all our might, which, as everyone knows, has the power to bring down the rains. It is this divine music that soothes and calms us, to face yet another round of buying government bonds.

Q: And is it working?

A: We were going fine, even thinking of starting our own little choir, but unfortunately one of the Monetary Policy Committee members, Jayanth Varma, has been singing a different tune these days.

Q: Is it necessary for central bankers to sing?

A: The Raga is for the crops, of course. We are ‘Conspiring with him how to load and bless/With fruit the vines that round the thatch-eves run/To bend with apples the moss’d cottage trees/And fill all fruit with ripeness to the core.’

Q: Good one. Shaktikanta Das?

A: John Keats. It is thus that we shall slay the accursed Asura of inflation.

Q: Ah, you think inflation is transitory?

A: As are all things. Here today, gone tomorrow.

Life is but a day;
A fragile dew-drop on its perilous way

From a tree’s summit.

Q: Michael Patra’s? And what about growth?

A: John Keats again. Growth will, of course, depend on our karma.

Q: Yes, but what is the RBI doing about it?

A: Well, we’re trying to awaken our kundalini, so that it expands our consciousness and opens up our sacred connection to the Source of All Being. Also, we keep interest rates low.

Q: How exactly does the kundalini work?

A: We can raise kundalini from the Root Chakra to the Crown Chakra, which results in Illumination, the opening of the Third Eye, which will lead to Nirvana or Enlightenment.

Q: Monetary Nirvana?

A: No, that’s quantitative easing. But Zen does help us face negative real rates without even raising an eyebrow.

Q: Zen?

A: Zen is from the Chinese Ch’an, which is from the Sanskrit Dhyana. ‘Sitting quietly/doing nothing/spring comes/and the grass grows/ by itself.’

Q: Very profound. Will the economy grow by itself?

A: Perhaps. Who knows? The idea is to meditate and connect with your inner self, seek the stillness within. Everything follows from that.

Q: Like what?

A: Everything. Money supply, for instance.

Q: What are your thoughts about the recovery?

A: ‘For winter's rains and ruins are over, And all the season of snows and sins; The days dividing lover and lover, The light that loses, the night that wins; And time remembered is grief forgotten, And frosts are slain and flowers begotten, And in green underwood and cover Blossom by blossom the spring begins.’

Q: Nice. Written by an utterly bored Monetary Policy Committee member?

A: No, by Algernon Charles Swinburne.

Q: Do you think the government should give a bigger fiscal stimulus?

A: As the Tibetan Book of the Dead says, ‘it is not the size of a gift, it is its quality and the amount of mental attachment you overcome that count. So don't bankrupt yourself on a momentary positive impulse, only to regret it later. Give thought to giving. Give small things, carefully, and observe the mental processes going along with the act of releasing the little thing you liked.’ The government has read the Tibetan Book of the Dead and knows what it is doing.

Q: So which is more important for you: inflation or growth?

A: A fine balance has to be struck between the Yin of inflation and the Yang of growth. Perhaps one has to go beyond them, as symbolised by the concept of the Ardhanarishvara, which signifies the totality that lies beyond duality.

Q: Hmmm. Like the finance ministry and the RBI?

A: A bit like that.

Q: And what about stocks? Do you think they are overvalued?

A: Many of them have transcended the bounds of things so mundane as valuations. We forget that man does not live by bread alone. There are also unicorns.

Q: What do you think are the most important trends in the markets at present?

A: Oh, without doubt, Maya and Leela.

Q: Are they foreign portfolio investors?

A: They show that things are not always what they seem.

Q: What do you mean?

A: As Lewis Carroll wrote: ‘He thought he saw a Banker’s Clerk/Descending from the Bus/He looked again and found it was/A Hippopotamus.’ It is a very perceptive comment on monetary policy today.
Manas Chakravarty