Soon after the release of nine month high retail inflation data and worse than expected October factory output data , the Reserve Bank of India (RBI) Governor Raghuram Rajan underscored that Indian economy was in weak position, with high inflation and that central bank will take overall view of macroeconomic data to carefully calibrate its monetary policy. Retail inflation, measured by the consumer price index (CPI) soared to a nine-month high of 11.24% in November, while the Index of Industrial Production (IIP) contracted 1.8% in October.
Adding further, Reghuram Rajan pointed that retail inflation at 11.24% was out of the RBI’s comfort zone and both monetary and fiscal policies were essential to tackle inflationary pressures. He cited supply side bottlenecks as a main reason for increasing inflation in the country.
While, referring to the fiscal deficit, the Governor averred that the government has laid down a road map that is expected to keep the fiscal situation within a target level at 4.8% of GDP for the current financial year. Aligning diesel prices with international rates would definitely control the fiscal deficit in the long run, but will exert downward pressure on inflation in short term, he added.
Furthermore, he cautioned that rising inflation in the country had become a concern for the RBI, which has been continually raising the policy rates over the past few months in order to trim the inflation.
Adding further, Reghuram Rajan pointed that retail inflation at 11.24% was out of the RBI’s comfort zone and both monetary and fiscal policies were essential to tackle inflationary pressures. He cited supply side bottlenecks as a main reason for increasing inflation in the country.
While, referring to the fiscal deficit, the Governor averred that the government has laid down a road map that is expected to keep the fiscal situation within a target level at 4.8% of GDP for the current financial year. Aligning diesel prices with international rates would definitely control the fiscal deficit in the long run, but will exert downward pressure on inflation in short term, he added.
Furthermore, he cautioned that rising inflation in the country had become a concern for the RBI, which has been continually raising the policy rates over the past few months in order to trim the inflation.
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