Inflation: Dealing with inflation, which has reached high levels for the last three quarters, test for India, impact on investment

Posted on 29th Oct 2022 by rohit kumar

There is no relief from the high inflation in the country for the last 9 months. This is having an impact on consumption and investment. RBI's Monetary Policy Committee (MPC) member Shashank Bhide said that the rate of retail inflation has remained high for the last three quarters due to external pressures i.e. imported inflation. To deal with this, better policy efforts are necessary.

 

Bhide said the high prices of fuel and food items and their impact on other sectors have kept the rate of inflation high. Inflation pressure is very high. It is certainly a test for India's inflation-tackling framework. Inflation remained high in the second quarter of 2022-23. Due to this, its rate was also higher in the last two quarters. Retail inflation has remained above 6 percent since January 2022. It was 7.41% in September.

 

 

Steps to be taken to limit the effect of external pressures

The MPC member said that it is necessary to take steps to limit the impact of external pressures on inflation and the economy. Dealing with these issues will require coordinated policy efforts, monetary policy, and other economic policies. The purpose of RBI's monetary tightening i.e. increase in the repo rate is to reduce the inflationary pressure.

 

The increase in the repo rate has increased the cost of debt. To this, the expectation of lower inflation will help in improving the demand situation.

New challenges in the path of development

 

On India's current macroeconomic situation, Bhide said, "The risk comes from the uncertain global environment. However, the domestic economy has shown resilience in getting back on the growth path even after going through several waves of the pandemic.

Challenges that are emerging include declining export demand, volatility in financial markets, and uncertainty as a result of the Ukraine war.

 

Also Read: Recession in America: US GDP on the green mark after two consecutive quarters of decline, no recession at the moment

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