The Reserve Bank of India (RBI) should prioritise reducing inflation down within the mandated range of 2–6%, according to officials in the finance ministry, even if doing so has a negative impact on economic growth.
The finance committee recommended that even if it slows growth, the central bank concentrate on reducing inflation until it is below the tolerance level of 6%. The official added that there are o such worries in India because it is well-positioned in terms of lasting macroeconomic stability.
The central bank must monitor the inflation trend before switching its attitude from “removal of accommodation” to “neutral.”
The RBI anticipates that retail inflation will be 5% in the first quarter of 2023–2024 (FY24) and 5.3% on average. Although though it has projected inflation for the January-March quarter of FY23 at 5.7%, experts think the problem with inflation is still ongoing and the quarter might witness average inflation of 6.3%.
India’s central bank has expressed concern about higher inflation because of the uncertainty surrounding the Russia-Ukraine conflict, which is producing supply-side disruptions in a supposedly post-Covid world that is still recuperating from economic shocks.