RBI has retained its inflation projection at 5.4% for the current year. Uncertainties in food prices and volatility in global crude oil prices continue to keep 4% target out of reach.
Geopolitical conflicts & new cold war have upended oil, various food and commodity markets. Climate-change issues will impose other costs. So, prices will rise even if demand is weak.
Findings are of relevance for RBI, which has followed inflation targeting policies since 2016 but had to write to govt in December 2022 explaining why inflation had overshot target.
Many experts argued against retaining 4% plus-minus 2% target, while some wanted to scrap the framework altogether. But it provides stability, can help growth.
Year-on-year method misses trends in prices, so month-to-month seasonal adjustment should be used. According to this, May-December avg inflation was 4.05%.
RBI must work towards better transmission mechanism, for which India needs deep & liquid bond market, competitive banking sector & regulatory framework.
A poor Muslim man from Kurnool, selling khoya buns during the Medaram Jatara in Telangana, was harassed by some YouTubers and surrounded by a mob over allegations of 'food jihad'.
Indian refiners are testing Venezuelan barrels again as Russian supply sinks, but analysts say volumes will remain limited due to refinery constraints & supply capacity.
This is the game every nation is now learning to play. Some are finding new allies or seeing value among nations where they’d seen marginal interest. The starkest example is India & Europe.
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