Why are our economists so confused?

The Monetary Policy Committee, MPC, of the Reserve Bank, RBI, is to meet shortly to decide on interest rate which has been held at 6% since August last year. S Rakshit expects the RBI to keep interest rate steady at 6% but expects a 50 basis points increase at its meetings later in the year. Retail inflation will average 4.7% as against 3.6% in financial year 2018 because of a possible rise in food prices due to higher minimum support price. Core inflation remains consistently high, oil price will remain higher than previous years and a weaker rupee will make imports more expensive. Goldman Sachs expects commodity prices, including oil, to remain high in the next 12 months. SS Bhalla taunts one member of the MPC, Viral Acharya who said at its April meeting, "What concerns me is that the more persistent component of headline inflation, which is ex food and fuel, and which one can consider as the 'signal' given its persistence, has strengthened steadily from a trough of 3.8 per cent last June to 4.4 per cent in February (excluding the estimated impact of Centre's house rent allowance increase, that is, ex HRA). This rise has been broad-based." 'Viral' in Hindi means 'precious'. Bhalla mocks him writing, "Inflation, not yet viral." He then proceeds to calculate the effect of petrol on the consumer price index. "No where does Acharya, or any other member of the MPC, point out that petrol should not be included in core excluding housing (CoreXh)," wrote Bhalla. But, Acharya clearly said "headline inflation, which is ex food and fuel" and fuel surely includes petrol. Bhalla then does some fancy math, showing that inflation will increase by a paltry 11 basis points, which is nothing. Bhalla is a member of the Prime Minister's Economic Advisory Council and was recently accused of using selective data in support of Modi. Although GDP grew at 7.7% in the quarter ending 31 March, "Private final consumption expenditure continues to languish, with the share of its contribution to GDP sliding to 54.6% in January-March period, from 59.3% in the preceding quarter and 55.2% a year earlier," wrote an editorial in The Hindu. "Consumption -- both private and government -- has been the main driver of growth since Narendra Modi came to power in 2014," disagreed M Chakravarty, giving a chart showing private final consumption expenditure at 58.85% of GDP in 2017-18. The government can easily reduce retail inflation by reducing taxes on petrol which is more than 100% at present. But it cannot, because economic growth is dependent on high government spending and cutting taxes on fuel will increase fiscal deficit. Government owned oil company ONGC is refusing to take a loss by reducing prices because the government forced it to buy 2 other government units for Rs 370 billion. In effect, transferring money from one pocket to another and claiming it as revenue. No one wants to take on the government. Hence economists are confused.