Dharmakirti Joshi
Chief Economist, CRISIL
Monetary policy across major central banks remains more yoked to growth than inflation at this juncture.
Friday’s move by the Monetary Policy Committee (MPC) of the Reserve Bank of India to stand pat and accommodative shows it sees inflation as transitory. Indeed, that’s the case on the supply side. But unlike advanced countries such as the US, inflation in India is over a high base and in spite of weak demand.
Companies have already begun passing on rising input costs to consumers to protect margins. The MPC will have to keep its eyes peeled on prices in the coming quarters.
But with the clamour around prices getting louder, the MPC has also, like many others, raised its inflation forecast to 5.7% for the current fiscal from 5.1% in June.
As expected, the RBI has kept India’s growth outlook unchanged at 9.5% for this fiscal. Together with external demand, it sees domestic drivers of consumption and investment gaining traction. (Share Manthan, August 06, 2021)
