What a trilemma!

"India's economic growth likely accelerated to 7.3% in the second quarter of the fiscal year, buoyed by a resilient rural economy, higher government spending and early export shipments, according to an ET poll of 12 economists." "GDP expanded 7.8% in the April-June period, the fastest in five quarters." ET. Despite scorching growth, "India's retail inflation slowed to a record low of 0.25% in October, against 1.54% in September, as food prices fell sharply and tax cuts brought down the prices of items from cars to products in daily use, government data showed." ET. Also, "Wholesale prices fell to a 27-month low and slipped into deflation after two months of positive readings, declining to -1.2% in October, owing to a drop in food prices, and softer fuel and manufactured goods prices, showed official data." ET. "The ministry of statistics and programme implementation (Mospi) has opened a discussion:..should free goods be included in the consumer price index?" wrote Prof Prachi Mishra. The Central government is providing 5 kg of free food grains per person per month to 813.5 million people from 1 January 2024. NDTV. Since food and beverages make up 54.18% of our consumer price index (CPI) basket of goods (pib.gov.in), correcting for free food handouts should give a lower and truer figure for CPI inflation. But, why stop at food? What about cash transfers, such as Rs 10,000 to 7.5 million women in Bihar just before assembly elections, at a cost of Rs 75 billion (pib.gov.in)? And, "What about free medicines, healthcare and education?" That is why other countries also calculate core CPI inflation rate, but this is not officially published in India. Core inflation is measured excluding food and energy prices because these are volatile. Investopedia. India's core inflation was estimated at 4.233% in October. India Macroeconomic Index. "The retail inflation excluding gold is expected to remain negative over the next two months, according to a report by SBI Research, highlighting an unusually low-inflation environment in India." Core inflation, excluding gold, came down to 2.6% in October. ET. Goods and services tax (GST) rates have been reduced on a range of goods, from 22 September (pib.gov.in), which has helped reduce retail inflation by 85 basis points (bps) instead of earlier estimates of 65-75 bps. While India's inflation is trending below 2%, the CPI for all urban consumers rose by 3% in the US (bls.gov). A rise in prices means a fall in the value of the currency. Since prices in India are rising at a much slower rate than those in the US, the Indian rupee should be hardening against the US  dollar. But, the Reserve Bank of India (RBI) is valiantly trying to defend the rupee from falling below 89 to the dollar by hedging against the dollar, especially in the non-deliverable forward market (Investopedia). "It seems the market has not given the RBI enough time to cleanse short positions that it accumulated around 88.80 (RBI forward book stood at USD 53bn as on August end and the guesstimate is that it may be upwards of USD 60bn currently," wrote Abhishek Goenka. In its last meeting, the RBI held its policy rate at 5.50% (pib.gov.in). With inflation so low there are ample reasons to cut interest rates. Will it? But, what if it can't hold the rupee? A weaker rupee will increase import prices and lead to inflation. Seems that the RBI is caught on the horns of, not a dilemma, but an impossible trilemma (wikipedia). Tough.