The early stages of inflation, as Jens Parsson pointed out in “Dying of Money,” can be a really fun time. Money expands, stock markets boom and state spending rises as governments fund deficits without drama. People start to feel well off, amid generally stable prices.

That happy place is where India has been for the past few months. Asia's third-largest economy has delivered one of the world's most balanced recoveries, spread evenly over consumption, investment and exports. But now, notes the Reserve Bank of India, an ominous transition is under way: “inflationary pressures” triggered by the weakest monsoon in almost 40 years, are developing into “a wider inflationary process”. The year-on-year rise in wholesale prices accelerated from 0.5 per cent in September to 9.9 per cent in March, well ahead of the bank's baseline projection of 8.5 per cent.

Governor Duvvuri Subbarao, who has taken to appearing on television to calm fears over food price inflation, is right to describe this as “worrisome”. The bank's remedial actions – increasing its key repo rate for the second time in a month, while ordering lenders to set aside more cash as reserves – may skim some of the froth. But the governor's best hope is rain, and therefore lower food prices. Even after Tuesday's tweaks, monetary policy seems unduly accommodative; industrial production is roughly twice as strong as it was during the early stages of the last tightening cycle six years ago. Meanwhile, the RBI will be wary of soaking up too much cash: the government's planned bond issuance this fiscal year is more than a third higher than last.