RBI says inflation is on track to meet projections

MUMBAI: Inflation is likely to remain within the Reserve Bank of India‘s (RBI) projected levels for the rest of the year, it said on Tuesday while highlighting that inflation containment comes at the cost of economic growth.
Earlier this month the RBI raised its 2021-22 inflation forecast to 5.7% from 5.1% and reiterated that it will continue to keep monetary policy accommodative as long as necessary to revive and sustain growth on a durable basis.
The retained stance and increased inflation forecast started a debate over whether monetary policy has forsaken its primary mandate of price stability in the face of the continuing Covid-19 pandemic.
The RBI is mandated to bring down retail inflation to 4% over the medium term while keeping it within a range of 2-6%, a band it has breached twice this year.
Inflation is on the central bank’s envisaged trajectory and likely to stabilise over the rest of the year, the RBI said of what it described in Tuesday’s bulletin as “a credible forward-looking mission statement for the path of inflation”.
“The MPC demonstrated its commitment and ability to anchor inflation expectations around the target of 4% during 2016-2020. The once-in-a-century pandemic ratcheted up inflation all over the world and India was not immune,” it added.
“Our MPC is India-focused; it has to be. It must choose what is right for India, emulating none, not emerging nor advanced peer,” the bulletin said.
A reduction in the rate of inflation can be achieved only by reduction in growth; an increase in growth is only possible by paying the price of an increase in inflation, always and everywhere, the RBI said.
Easing of pandemic-related restrictions and ongoing vaccination programme has helped to boost demand conditions while improving monsoon and rising agricultural sowing activity is improving supply conditions in the economy.
“The MPC voted to give growth a chance to claw its way back into the sunlight,” the RBI said.

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Author: Shirley