Food inflation has been a perennial tooth ache for policymakers as much it has been for the common man. Food inflation has not come down to comfortable levels and high inflation has limited the options that the UPA II had at its disposal to stimulate growth. Both the RBI and the Finance Ministry have not been able to balance growth and inflation successfully, which has impacted both the business as well as the citizenry.
A new Government may push for a loose monetary policy. However, if Rajan continues as the RBI Governor till 2016 when his term ends, he could continue to play spoilsport.
A good rabi crop is expected to ease food inflation. If the CPI does cool down, a rate cut could be on the cards but that at the moment seems more back-ended this year. A rate cut could then stimulate lending and output.