Former RBI governor Raghuram Rajan has said that India needs to re-calibrate its response to the price situation as a result of disruptions in global supply chains caused by the Russia-Ukraine war, because losing the battle against inflation serves neither the government nor the central bank. Rajan, who is known for his candid opinions, went on to say that it is critical for any central bank to follow the mandate given to it by the government. "India's central bank has a mandate that has served it well in terms of allowing it to respond to some of the concerns during the pandemic while maintaining moderate inflation," he said at a press conference.

The RBI is mandated to maintain an inflation target of 4% with a +/-2% tolerance band. "And, like any other central bank, as we emerge from it and face new challenges, we have to recalibrate and ask whether the old playbook sort of still holds," Rajan said, adding that he believes this is critical. "Because otherwise, if you lose the battle against inflation, it serves neither the government nor the RBI," said the eminent economist.

In January, the retail inflation rate exceeded the RBI's upper tolerance limit of 6% for the first time in seven months, while the wholesale-price index remained in double digits for the tenth month in a row. In response to a question about whether current inflation is a blip, Rajan stated that this (inflation) is on top of already high levels of inflation in many parts of the world.

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