New Delhi, Feb. 10 -- The interest charged on loans is the most important price in an economy. And its rate is nudged up and down by the lender of last resort-the Reserve Bank of India (RBI) in our case-for good reason. It helps keep the economy's growth path stable. Inflation held on a tight rein, RBI's explicit mandate since 2016, is aimed not just at public relief on the cost of living, vital in itself, but also at easing the cost of capital: it lessens the risk of lenders being repaid less in real terms because of a shrunken rupee.

On Friday, RBI Governor Sanjay Malhotra did well to defend its inflation targeting framework in his first monetary policy statement since taking charge. He also announced a policy rate cut of a quarter per...