MUMBAI: Monetary policy is at work. Substantial disinflation has been achieved, but the road to be travelled stretches ahead till inflation declines to the target of 4 per cent, says an article published in RBI’s latest Bulletin.
The government has mandated the Reserve Bank of India (RBI) to ensure retail inflation based on the Consumer Price Index (CPI) remains at 4 per cent with a margin of 2 per cent on either side. Inflation during January-February 2023 exceeded the upper tolerance limit of 6 per cent after a transitory respite during November-December 2022.
The central bank, which effected six back-to-back hikes in the key short-term lending rate (repo) since May 2022 to check high inflation, decided to pause early this month. The cumulative rate hike since May 2022 is 250 basis points. The retail inflation in March fell to a 15-month low of 5.66 per cent and came back to the Reserve Bank’s comfort level of 6 per cent.
The article, published on April 21, has been authored by a team led by RBI Deputy Governor Michael Debabrata Patra. It noted that the global economic conditions are beset by heightened uncertainty as financial conditions remain volatile and financial markets are on edge.
In India, aggregate demand conditions remain resilient, supported by a rebound in contactintensive services. Expectations of a bumper rabi harvest, the fiscal thrust on infrastructure, and the revival in corporate investment in select sectors augur well for the economy, said the article titled ‘State of the Economy’ published in RBI Bulletin April 2023.
