RBI, Centre have reined in inflation; weather plays spoilsport: Experts
Reserve Bank of India (RBI) — increasing repo rates by 250 bps since last year, incremental cash reserve ratio — and the Central government's export controls have ensured that inflation is relatively under control, opined economists.
India's central bank, the RBI, acts to control inflation through its monetary policies while the government does that through governance, infrastructure development that brings down the transaction costs and other ways, they added.
«The RBI views inflation largely as a monetary phenomenon. Whether the inflation is due to supply or demand side, and whether it is driven by core or non-core components, the RBI believes that monetary policy intervention is required if the inflation rate breaches the tolerance zone,» Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers, told IANS.
As a result, the RBI bases monetary policy on headline retail inflation (changes in cost of commodities, goods, services) rather than core retail inflation (changes in cost of services and goods excluding food, energy sectors).
According to Hajra, the RBI with its mandate for growth support, strikes a balance between inflation management and growth promotion.
«Consequently, the RBI may maintain an accommodative monetary policy stance to encourage growth even if the central bank is concerned about the current inflationary environment.
Similarly, during periods of adequate growth and relatively low inflation, the RBI frequently takes proactive steps such as tightening monetary policy to prevent inflationary pressures from building up,» Hajra added.
According to Hajra the RBI's actions aim to stabilise inflation around the target rate over the medium term. Furthermore, in addition to
