The Reserve Bank of India (RBI) has set its sights on controlling inflation as a crucial driver to bolster the expansion of the country's Gross Domestic Product (GDP). In its latest revision, the RBI has upped its GDP growth projection for this fiscal year from 6.5% to 7%. Achieving a consistent 7.2% growth annually has been identified as a pivotal metric for India's sustainable economic advancement—reflecting the pace necessary for the economy to double in size over a decade.

However, the current challenge lies not just in achieving growth but in doing so while maintaining price stability, a cornerstone since 2016 marked by retail inflation anchored at 4% year-on-year. This steadfast control over inflation serves a dual purpose: reducing risks for lenders and making loans more affordable, thereby stimulating faster economic expansion.

The RBI's decision to keep the policy rate at 6.5% during its December rate-setting panel review indicates a commitment to maintaining a stance of "withdrawal of accommodation" and employing various measures, including an "Arjuna’s quiver," specifically designed for inflation control. This strategic move follows last year's implementation of a series of rate hikes totaling 2.5 percentage points to tighten credit.

Although the RBI forecasts inflation to be at 5.4% for the 2023-24 period, which remains below its concern threshold of 6%, achieving this target seems likely to extend into the next fiscal year. The success of this prolonged battle against inflation, assuming no unforeseen shocks intervene, could significantly elevate the country's economic performance.

Crucially, the effective management of inflation not only lowers the cost of capital but also ensures fairness for Indian savers, without subjecting them to undue financial pressures. Given the substantial rewards associated with maintaining a credible cap on inflation, the RBI's unwavering focus becomes imperative.
The RBI's strategic emphasis on curbing inflation is poised to create a more robust economic foundation. This commitment not only fosters growth but also ensures a fair and sustainable economic landscape, thus warranting continuous attention and dedication from the central bank.

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