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.
The current Iran war has laid bare a fundamental reality: 20 per cent of global energy trade cannot afford to rely on a single artery, no matter how resilient and cost-effective.
Regulator seeks feedback on allowing firms to repurchase shares via exchanges after tax changes, as markets reel from war-led selloff and foreign outflows.
It’s easy to understand why the government can’t speak the hard truth. When this war ends, as all wars do, India’s interests will lie with both the winner and the loser.
COMMENTS