How to know which professor is right?

"Cut the monetary policy some slack," wrote Prof V Dahejia, in defence of the Monetary Policy Committee of the Reserve Bank, or MPC, which meets every 2 months to decide on policy rate in India. Chief Economic Adviser, Arvind Subramanian has been vociferous in calling for a hefty reduction in policy rate by at least 50 basis points. Policy rate depends on predicting the level of retail inflation in the near future so "the best that monetary policy can do is to try and keep inflation within a band of uncertainty". "The reality is that the world over, in both advanced and emerging economies, and not just in the case of India's MPC, economists have been consistently over-predicting inflation in recent years," wrote Dahejia. Why? Apparently, the short run Phillips curve has become flatter and analysts maybe over-estimating Friedman-Phelps natural rate of employment, or both. In short, it is extremely complicated. "The broader point is that a well-functioning MPC does not jump up and down in the face of minor and potentially transitory shocks, but attempts to smooth the changes in policy rates over the medium to longer term. This naturally imparts caution (or, if you prefer, inertia) to rate setting behaviour because this means it is better to err on the side of not cutting rates rather than cutting too much and having to raise again in the near future (or the converse)." The MPC did cut rate by 25 basis points on 2 August, when 4 members voted for the cut, one voted for a cut of 50 basis points and one voted against any cut at all. After the MPC meeting retail inflation for July went up to 2.36%, compared to 1.46% in June, and wholesale prices rose by 1.88% in July, compared to 0.9% in June. Vegetable prices jumped by 21.95% in July. Prof Kaushik Basu, who was Chief Economic Adviser to India from 2009-2012, was not impressed with the MPC. "Instead of cutting rates by 25 basis points,it should have cut by 50, and signalled that this is the broad direction it intends to pursue in the future," he wrote. A higher rate of inflation, between 3-4% creates jobs in developing economies, high inflation is usually due to one item and not broad based and we need higher investment. But his real reason is that high interest rate is attracting foreign capital into Indian markets and making the rupee stronger. A large reduction in interest rate will stop such inflows and make the rupee weaker which will stimulate growth and exports. But what if capital flows out of India, causing the rupee to drop sharply? Inflation will jump because imports, especially oil, will become more expensive, and the MPC will have to raise rates again. Which professor should we believe?