Retail inflation fell to a 15-month low of 5.66 per cent in March. (file)
Mumbai:
Monetary policy is working. An article published in the latest RBI bulletin said that while substantial deflation has been achieved, the road to be traveled lies ahead until inflation reaches the target of 4 per cent.
The government has mandated the Reserve Bank of India (RBI) to ensure retail inflation based on the Consumer Price Index (CPI) at 4 per cent with a margin of 2 per cent on either side.
Inflation crossed the upper tolerance limit of 6 per cent during January-February 2023 followed by a temporary relief during November-December 2022.
The central bank, which effected six back-to-back hikes in the key short-term lending rate (repo) from May 2022 to check high inflation, earlier this month decided to pause. The cumulative rate hike from May 2022 is 250 basis points.
Retail inflation fell to a 15-month low of 5.66 per cent in March and came within the Reserve Bank’s comfort level of 6 per cent.
The article authored by a team led by RBI Deputy Governor Michael Debabrata Patra said that the global economic situation is surrounded by extreme uncertainty as financial conditions remain volatile and financial markets are on edge.
In India, aggregate demand conditions remain resilient, supported by a boom in connectivity-intensive services. Expectations of a bumper rabi crop, fiscal thrust on infrastructure and revival in corporate investment in select sectors augur well for the economy.
The article titled ‘State of the Economy’ published in the RBI bulletin said, “Monetary policy is working. Substantial deflation has been achieved, but there is a long way to go till inflation reaches or close to the 4 per cent target”. ” April 2023.
In response to monetary policy actions and supply-side measures, the authors said headline CPI inflation is projected to gradually decline from its peak of 7.8 percent in April 2022 to 5.7 percent in March 2023 and further ease to 5.2 percent in January Is. March quarter 2023-24.
The article further states that stable value and financial stability over time will strengthen the foundation of the economy and drive growth.
Central banks around the world that are invested with dual mandates are at a crossroads in their course.
The article said that the RBI has taken the path less traveled by balancing and calibrating both the pace and the action.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)