The RBI’s dovish tone on inflation and growth is good optics, especially when it happens to be the new fiscal year’s first bi-monthly monetary policy review. The higher GDP growth forecast of 7.4 per cent is not unexpected because the effects of the two policy disruptions — demonetisation and GST — have started waning. Lower food prices have prompted the RBI to significantly reduce its earlier inflation forecasts. Despite this optimism, the six-member Monetary Policy Committee (MPC) chose to be cautious. While five voted to keep the policy interest rates unchanged, one member voted for a hike. The minority vote must not always be ignored.Undoubtedly, optimism rests on fragile scaffolding and that is why the RBI has decided to maintain the status quo on interest rates. There are several reasons for the undue caution: the international economic scenario is uncertain as the US’ protectionist policies threaten to trigger a global trade war. India survived the 2008 global slowdown because of strong domestic demand, an autonomous informal sector and robust financial institutions. Today, this scenario has significantly changed. India is now logged on to the global financial system and no longer enjoys such comfortable isolation from the global trade. The informal economy is yet to recover completely from the twin policy after effects. And, the country’s financial sector is in a state of shock because of mounting NPAs and banking frauds. Although, at first glance, the internal economic situation appears rosy, there are several pinpricks. The notoriously volatile fuel rates, particularly diesel prices, are at record levels and could easily stoke inflation. Prices of essential commodities may spurt because of the promised HRA to government employees and significantly enhanced minimum support prices (MSPs) to farmers ahead of crucial state elections and the general election next year. The country’s fiscal deficit, which is already off track, is expected to grow further in an election year. Given these imponderables, the RBI may be justified in maintaining the policy rates. Its optimism, however, comes with several riders and these need to be kept in mind before taking any crucial economic policy decision.