MUMBAI: For someone who was looking for inflation everywhere just a few months ago, to cut interest rate when surveys point to inflation expectations rising 180 basis points to 11.4 percent in a matter of months, is nothing short of a dramatic U-turn.A central bank that laboured for nearly four years to sensitize the administration and the society about the perils of inflation taking a plunge believing in pragmatism than caution, indicates a paradigm shift with the new Governor.What has changed in the Reserve Bank of India is just not how the monetary policy is administered, but something beyond that. Urjit Patel , in his first public engagement since taking over as governor from Raghuram Rajan last month, has laid out a new vision and path for the Reserve Bank of India – a flexible and liberal central bank. That is quite in contrast to what Patel the deputy governor was.In a way the 25 basis points reduction in interest rate to 6.25 percent has been a welcome relief for traders who were worried that he was too rigid in his approach. His commentary has changed market perceptions about a hawkish economist who never missed an opportunity to express his inflation fighting credentials."What we have identified are some upside risks but there are downside risks also,’’ said Patel. "If you see the range, it’s very large. If I look over the next seven-eight quarters, the government has introduced structural reform policies which have been done to ease supply constraints. There have been larger investments in roads, railways which will improve infrastructure, the ease of doing business. The pro-active food management has played a crucial role in the past two years and will continue to play a crucial role in times to come. There has been an improvement in pulses supply, which has been a major contributor, and there has been a sharp improvement in competitiveness ranking.’’But the shocker is when that is read with the Monetary Policy Report: "In the September round, in fact, inflation is expected to be 9.5 percent and 11.4% one year ahead.’’The one-year inflation expectation has risen by 180 basis points since the previous survey and 200 basis points since March. The upside risks that Patel himself talks about are the minimum wage legislation and the higher support prices for pulses, the equivalent of the NREGA and minimum support prices for food products which drove inflation to double digits in the previous round.If inflation expectations is deep entrenched, Patel’s decision to go for a rate cut and promise more is more a gamble than a scientific one. Now, few know whether it was the 6-member MPC that was at work, or Patel’s push. But the signal it has sent out is contrary to what it was till now.Inflation is forecast at 4.5% for fiscal 2018 when the target is 4%."It is in the context of unanticipated shocks to the future evolution of in?ation that the rationale of setting India’s in?ation target at 4 per cent with a tolerance band of +/- 2 per cent can be appreciated,’’ RBI says.In a way, the MPC is saying, guys the target is not 4%, but 6%. That’s making a mockery of inflation targeting that was peddled.But what can determine whether it is a throw-back to the dark ages of regulatory connivance with the regulated is the way its promise to look at the resolution of the bad loans problems evolve."We will be dealing with the situation with firmness but also with pragmatism so that the economy does not feel any lack of credit,’’ said Patel. "The situation has not occurred overnight and therefore will require a skill and thoughtful approach to resolve.’’Patel is in a way is saying there was little thought in what the RBI was doing. That’s a blow to the institution.If that turns out to be a euphemism for going back to old ways of dealing with defaulters and banks, it may bring smiles back on to faces of defaulted billionaires, but will be rowing the economy back. Of course, Patel has a chance to show these were communication gaps rather than his intentions.