New Delhi: The fight against inflation will be dogged and prolonged, in view of the long and variable lags with which monetary policy operates, an RBI bulletin noted. "Yet, if we succeed, we will entrench India's prospects as one of the highest growing economies of the world enjoying a negative inflation differential with the rest of the world," the article reads.
A team led by Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra wrote a report on the state of the economy. It said that this good outcome will get foreign investors excited again, stabilise markets, and ensure long-term financial stability.
In September, retail inflation jumped to 7.41 percent. This is the ninth month in a row that it has been above RBI's upper tolerance level of 6 percent. As long as inflation stays above 6 percent, RBI will have to give a report to the central government explaining why it hasn't been able to keep inflation between 4 percent and 6 percent, with a 2 percent spread on either side.
"Even if headline CPI (Consumer Price Index) inflation stays above the tolerance band for three consecutive quarters (up to September), accountability processes will be set in motion," the article said. "However, monetary policy will continue to focus on bringing inflation back in line with the target."
The Monetary Policy committee, which is in charge of setting interest rates, is currently trying to fight inflationary pressures in the economy. These pressures are mostly caused by the war between Russia and Ukraine, which has caused supply pressures.
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