Vegetable prices still rising, populism risk grows

RBI Governor Shaktikanta Das reiterated this week that, despite the RBI keeping rates on hold this month, the easing cycle isn’t necessarily over. But the continued rise in vegetable prices over the past two weeks will keep the central bank on the sidelines in the near term. And further ahead stronger growth will push up core inflation, which could force the RBI to respond by hiking rates before the end of 2020. Meanwhile, the government’s shift towards more populist policy making – most recently with the passage of the controversial citizenship amendment bill – won’t derail a cyclical recovery in growth but could harm long-run prospects.