double trouble

There is yet another bad news for the economy, breaking its forecast by the International Monetary Fund of reducing India’s economic growth to below 7% in 2022-23. Data released on Wednesday showed industrial output declined by 0.8 per cent in August from a year ago, while retail inflation rose to 7.4 per cent in September. The fall in borderline output could potentially be attributed to shoddy data input, but there is no dent on inflation. Not only has it moved further away from the central bank’s 6% upper limit, but it has remained very high for three consecutive quarters. This means that the Reserve Bank of India should write to the government to explain this failure and explain in detail how and when prices will calm down. Inflation is a global concern and central banks, including the RBI, in a race to raise rates, will inevitably quell demand, albeit with some lag, and start easing price pressures. RBI expects this to happen by the end of this financial year. Success will make it easier to manage price expectations for it. Unfortunately, we have no way of addressing the global uncertainties. Our exposure to these is very high, reducing our scope for policy errors.