There is also a tradeoff between minimizing the sacrifice of growth and not letting expectations run out of control as a result of inflation persistence, exacerbated by new shocks. In the run-up to its recent Annual Policy statement, the RBI made an assessment that this had indeed emerged as a risk.
Against a backdrop of firm and possibly rising commodity prices, the prospects of inflation going down soon were seen as not being very high. This supported the decision to send a stronger signal of commitment to bringing inflation under control.